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Wednesday, 3 October 2007

How to be Rich - By: Stefan Enslin

The world's most successful investor once said that the secret of becoming rich was to be greedy when others are fearful and very fearful when others are greedy. Who is this guy that said this, and is he really so successful that he can give advise? In my mind he is the right person to give advise and the right person to listen to. He is the second richest guy in the world with a wealth of $40 billion and his name is Mr. Warren Buffett.

This man can be judged by his deeds and not just by his words. His record as an investor is one of spectacular success, often with investments in quite hum-drum businesses that have grown tremendously over time. Interestingly Warren Buffet ignored the Tech stock boom of the late 1990s, and also missed the crash. But he has been far more active in accumulating energy assets in recent years. Indeed, he has virtually ignored the US stock market and has concentrated on large energy sector assets, such as pipelines and a stake in PetroChina, US private equity and anti-dollar currency and precious metal investments. There is no sign of Warren Buffett bailing out of any of these investments. In fact when the US dollar rallied earlier this year, he made a statement refusing to change his dollar-negative position. Gold's rally to a 17-year high of almost $460 an ounce must therefore be music to his ears. Warren Buffett has never been much of a real estate investor but his appreciation of the mentality of the investment crowd is probably the best of the best. It is very hard not to be impressed by the third Middle East oil boom. Stock markets have surged to new heights, massive new projects are announced daily and real estate prices have mushroomed alongside rents. Of course, this can be bad news for those struggling to make ends meet on lower incomes with inflation on the climb. But for business, there has seldom been a better time, certainly not since the 1970s. On the other hand, for investors - whose good times come early in any economic cycle - Warren Buffett's words of wisdom do come to mind. On Warren Buffett's logic this is the time to stay out of the market rather than become sucked into the maelstrom of greed, and a time to be very fearful of making commitments.

The question that jumps to mind is, what do we mean by being rich? How do we interpret being rich, is it just financial riches or does this include being rich in every sense of the word. After all, Mr Buffett gave away almost his whole fortune to the Bill & Melinda Gates Organization, who is helping charities. It is a proof to me that money is not everything, although we should not be naïve to think we can survive without it. He is rich in knowledge and knows when to invest and when to sit back and relax. Knowledge is a very powerful tool in feeling rich.

To me rich means, financially rich as well as rich in attitude, happiness, communication, knowledge etc. If you have all the wealth in the world but you are not happy then you are only about 30% rich. Mr Buffett, accepted that he has all the money in the world but that it is not the sole source of happiness. He still lives in a traditional home, drives his own car etc, and he is happy. To me he is rich in every aspect.

Rich is also the ability to live in financial freedom. So what does this mean? The ability to know how to handle money, to work with money, to know when something is bringing in money and not. Mr Buffett makes his money work for him, he does not work for his money. If we need something and cannot afford it, we should not say “I can’t afford this” we should ask “what can I do to afford this”. Become rich not just financially because money cannot always buy happiness, but be rich in every aspect, financially, attitude towards life, in your communication skills, negotiation skills, health etc.

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