The financial crisis of 2008 is one that many investors of the current generation will live to remember for the rest of their lives. Never before in this century has there been such a massive financial crisis in the world. Many investors lost their capital. The hedge funds were the most affected. Some of them closed down completely after they blew all the available capital. Warren Buffett, the most renowned investor in the world was in the midst of this crisis. Some of the stocks he had suffered major drawdowns. However, unlike other investors, the financial crisis did not run Warren and his company Berkshire Hathaway out of business.
Warren Buffett is actually one of the investors who made some gains out of the crisis. His investing strategy allows him to invest in moats only. These are companies that have a high chance of not being affected by any financial crisis to the extent of collapsing. Companies with a high margin of safety are the type of companies Warren likes. These are companies where he is sure that even if the unexpected were to happen, his investments would still be secure.
He compares the margin of safety to a bank that will not allow a borrower to borrow an amount just little of what he or she can manage to pay. A bank will want assurance that even if the borrower’s income was to go down, they would still be in a position to repay the loan. This is the same principle Warren applies in his investments to avoid the effects of financial crisis.
Warren was among the lucky investors who made money from the crisis. While stocks were going down, Warren Buffett, bought some of them at low prices. As the economy was coming back up again, he was making profits. Warren made $10 billion from the 2008 financial crisis.