Advice from Warren Buffett to young people on the verge of careers in managing investments

Asked what advice he could provide to young people on the verge of careers in managing investments, Buffett boiled down his principles into four cardinal rules:

1. Understand the business in which you are investing. "You can't make money in stocks unless you understand the business," he said. "I look for businesses within my circle of competence." Having a large circle of competence is less important than having one with a well-defined perimeter.

2. Look for sound fundamental economics. Investors should seek out companies that have a sustainable economic advantage — a phenomenon Buffett called "a castle with a moat around it." Consider Coca Cola, for example. The company's brand name has represented enjoyment for generations, which no competitor can buy for millions of dollars. "Share of market follows share of mind," noted Buffett.

3. Find competent leadership. Companies with a sustainable economic advantage need honest, capable and hardworking leaders to retain their lead. Berkshire-Hathaway's managers have one instruction: Widen the moat. That keeps the castle valuable.

4. Buy at the right price. Purchases must be made at the right price if they are to pay off.

Buffett cited example after example to show how he had used these principles to make investment decisions during his career. As a young investment manager, he took Moody's manuals and went through them page by page until he found the companies he sought. A bus company in Bedford, for example, had $100 a share in cash, but its stock was being traded at $40 a share. Buffett found such deals because he went looking for them. "No one will tell you about them," he said. "You only get told about things someone is pushing for some reason." Buffett invested in companies like Coca Cola and The Washington Post for similar reasons. Berkshire-Hathaway built its empire on the success of these investments.

Asked why he has not retired despite his phenomenal wealth, Buffett said the reason is that he has more fun doing what he does than anything else. "The fundamental thing is that the process should be fun," he said. "I had just as much fun when I had $10,000 to invest as I do now. It's crazy to do things for your resume. It's like saving up sex for your old age. You should do what you enjoy as you go along, and work with people you admire. I look forward every day to the next day. I'm wired for this game."