How Warren Buffet Deals With Huge Losses Worth Billions Of Dollars

Warren Buffet is one of the history’s greatest investors. At one time, he was the richest man in the world. As of today, his net worth is $72.3 Billion. This is what Warren Buffet said: “You only have to do a very few things right in your life so long as you don’t do too many things wrong”. You can read more here what is the net worth of Warren Buffet.

Warren Buffet is a value investor. He is a disciple of Ben Graham. As a young man he had read his seminal book, “The Intelligent Investor.” Ever since he read that book, he has followed the investment style advocated by Ben Graham. In simple term, he looks for value stocks that has fallen out of favor with the market but are still worth more than their market price. Once he buys a stock, he keeps it long term. He doesn’t believe in selling the stocks on when everyone becomes panicky. He has also taken staggering losses.

Interestingly most of the wealth that he made was earned after he reached the age of 50. Infact 99% of the wealth that he made was earned after 50.

Last year he had a staggering $2 Billion loss in 2 days when Coke and IBM stocks tanked. His Berkshire Hathaway (BRKB) investment house holds big pieces of Coke and IBM, both of which have taken a drubbing in the past two days.

He took a $1 billion hit on Coke (KO), which fizzled 6% on Tuesday after the company reported earnings that didn’t live up to expectations. Even worse, Coke said it doesn’t expect a much better 2015.

Coke is one of Buffett’s largest investments. He holds 400 million shares and his son Howard sits on the beverage company’s board. And he likes the products too. Buffett is often seen enjoying Cherry Coke.

The pain started on Monday for Buffett. IBM (IBM, Tech30), another top holding, lost $1.3 billion as the stock plunged. The company is looking for a reboot after reporting disappointing earnings and shedding its chip unit at a major loss.

The stock dropped 7% on Monday after then news was announced and slid again on Tuesday. It is off nearly 13% so far this year, and Buffett’s company holds over 70 million shares.

Assuming his net worth was around $70 Billion last year. A $2 billion loss in 2 days means a loss of around 3%. So how does Warren Buffet copes with such big losses.

In the summer of 1998, there was a currency crisis that originated in the far east and eventually wound its way around the globe, culminating in the devaluation of the ruble and the blow-up / bailout of the first systemically risky hedge fund in history, Long Term Capital. Both Buffett and Tepper took quite a beating during this so-called “Asian Contagion” event.

As Nick Murray explains, Warren Buffett was down quite a bit that summer.


A very large sum of money, wouldn’t you say? Now what, you ask, does it represent?

It is roughly how much Warren Buffett’s personal shareholdings in his Berkshire Hathaway, Inc. declined in value between July 17 and August 31, 1998. And now for the six billion dollar question. During those forty-five days, how much money did Warren Buffett lose in the stock market?

The answer is, of course, that he didn’t lose anything. Why? That’s simple: he didn’t sell.

This is in essence his strategy. He doesn’t panic when the market panics. He chooses his stocks carefully. He looks for businesses that he can own long term. Once he buys the stocks, he keeps that stock long term and doesn’t care about the market volatility because he believes in the long term successes of the businesses that he has invested in. Watch the video below in which he explains his investment strategy in detail.

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I have done masters from Harvard University. I am interested in day trading currencies, options and stocks.