The concept of diminishing marginal utility states that when a product or service is used up several times, the enjoyment derived from its use declines. This suggests that the product or service loses value as more people utilize it. This is why people are prepared to pay the highest price for the first unit of whatever they purchase, but after that, they frequently refuse to purchase subsequent units until the price is reduced.

Yet, there are a few caveats to this rule. Listening to/reading and analyzing the investment advice of great investors like Warren Buffett, Charlie Munger, Peter Lynch, and Mohnish Pabrai is one such exception. The outcome can even be described as ‘rising marginal utility’. For example, reading Warren Buffett’s yearly newsletters and observing what he says at the annual shareholder conference year after year helps you improve your investment skills.

Warren Buffett is known to make investing appear quite straightforward. To make investing easier, he advises everyone to ‘enjoy the subject, not the money’.

Buffett advocated reading ‘500 pages a day’ to prepare for a career in investment. He observed that reading increases knowledge in the same way that compound interest does to your wealth. Buffett used to study hundreds of pages of company-related documents and reports to gain more insight into the business, and he still does it today. His concentration would be on learning everything there is to know about every aspect, allowing him to find potential in businesses that he is familiar with.

For Warren Buffett, it really boils down to carrying out a strategy when the time is right to purchase or sell stocks. Long-term planning and patience in waiting for the ideal moment were integral components of his investing framework for making such judgments. Having such a technique allows for improved decision-making, particularly when markets are in euphoric or panic mode. This strategy has notably allowed Berkshire Hathaway to take advantage of discounts when buying stocks, as it did in 2008 during the height of the Global Financial Crisis.

One of the most essential factors in Buffett’s success as an investor is his ability to learn from his failures. Buffett, too, has made numerous investment blunders, and the greatest part is that he recognises them and brings them out before others do. Even better is how he applies what he’s learned from his errors.

The final takeaway is simple: continuous success in investment decisions requires years of hard work.