Investors across the globe are currently trying to absorb a momentous change. The retirement of the most successful investor in history, Warren Buffett. Seth Klarman, the CEO of Baupost Group and a legendary value investor in his own right, has recently written a heartfelt farewell on The Atlantic, as Warren Buffett prepares to “go quiet” and exit his day-to-day role at Berkshire Hathaway soon. And this letter is not just a eulogy for a career, but a tactical manual for Indian Investors.
While Indian investors usually get busy with finding the next big thing or look for super-fast gains in the volatile sectors, Klarman’s tribute highlights that Buffett’s multi-billion dollar fortune was built on the most mundane ways.
It wasn’t about luck; it was about the consistent application of a specific, actionable framework. Here is the Klarman-Buffett framewor to build wealth in the Indian markets, based on Klarman’s letter.
Rule #1: The portfolio audit (Stop ‘watering the weeds’)
“Buffett, to paraphrase the investment guru Peter Lynch, never cut his flowers or watered his weeds.”
In the Indian retail market, there is a widespread psychological trap: “loss aversion.” Many investors sell their winning stocks at a 20% gain just to book profits (cutting the flowers), while holding onto “dogs” that have crashed 50%, hoping they will one day return to their purchase price (watering the weeds).
Think of investors who held onto Yes Bank in 2019 hoping for a rebound, while selling Titan too early.
Klarman identifies that Buffett’s brilliance was the insight and conviction to stick with the best ones over time. The math is simple! One multibagger like Buffett’s Coca Cola pick, held for decades can offset dozens of small mistakes, but only if you don’t cut it early.
So, this weekend, categorize your holdings. If a company’s fundamentals have decayed or if its earnings are stagnant or its management is questionable, you might want to rethink your decision to continue holding it. Do not wait to break even.
If you decide to lose it, take that recovered capital and add it to your “flowers”. The companies in your portfolio that are demonstrating strong return on invested capital and consistent cash flow.
At the end of the day, you want a concentrated portfolio of strong investments rather than a cluttered garden of merely good or bad ones.
Rule #2: The stress test (Don’t get caught ‘swimming naked’)
“It’s only when the tide goes out that you learn who’s been swimming naked.”
Klarman notes that Buffett’s annual letters are full of such memorable quips, but this specific one is a warning about risk-taking. In a bull market, every trader looks like a genius because the rising tide lifts all boats. But Buffett navigated market booms and busts, financial crises, wars, and pandemics because he was never caught naked. In simple words, he never lacked liquidity when the market turned.
To invest like Buffett, you must operate from a position of strength, not desperation.
You must create your own float like Buffett used the insurance float. Liquidity available to be deployed until needed, to fuel his returns. As an individual, your float is your emergency fund and your absence of bad debt.
Also, if you are trading on borrowed money (margin) or using short-term personal loans to buy stocks, you are in effect swimming naked. If the Indian market sees a sharp 10-15% correction, you will be forced to sell at the bottom. Remember the big covid crash of 2020 and how it killed portfolios?
So, ensure you have enough cash sidelined to survive a two-year bear market without touching your equity portfolio. This voice of calm and reason is what allowed Buffett to enter buy orders when others were panicking.
Rule #3: The 6-year-old test (Avoiding the jargon trap)
“Buffett has lived into a saying often attributed to Albert Einstein: ‘If you can’t explain it to a 6-year-old, you don’t understand it yourself.'”
Klarman explains that Buffett’s letters were powerful because he imagined he was writing to a less knowledgeable relative who deserved to know the thinking behind his decisions. In India’s investment spaces, investors often hide behind jargon like Green Hydrogen thematic or Defence export order book. If the business model is so complex that it requires a PhD to explain, it probably isn’t a good business by Buffett’s standards.
Before you click ‘Buy’ on an IPO or an SME stock, perform the ‘Relative Test’. Can you explain how the company makes money, why customers won’t leave, and how it will grow in three simple sentences? Or can you explain the business model to a 6-year-old?
Klarman regards clear and uncomplicated thinking as a key strength of Buffett. Avoid companies with opaque accounting or shaky business models.
Buffett famously looked for fundamentally strong businesses that were so simple that in his words, “an idiot can run them. Because sooner or later, one will”. Look for those simple, cash-generative businesses that dominate their local niche.
Rule #4: The ‘boring’ alpha (Why you must read annual reports)
“The Average Joe, however, did not spend his days and evenings scouring stacks of corporate annual reports, footnote after footnote, for revealing insights.”
We often view Buffett as an Oracle with a crystal ball, but Klarman reveals a more boring reality: Buffett was relentless, working more or less alone, focusing on extensive due diligence and analysis. He wasn’t looking at social media trends. He was scouring stacks of paperwork for finding insights that the market had missed.
In the age of instant information, the boring work is where the alpha is hidden. So, don’t just look at the top-line revenue growth. Look at the related party transactions and contingent liabilities. Footnotes in the annual report are where the real risks (and frauds) are often hidden. For instance, reading the footnotes of a high-flying NBFC might reveal hidden stress in their loan book long before the stock price crashes.
Remember, the financial pundits you see on TV focus on the trendiest sector. Something Buffett was immune to. Commit to reading at least one full annual report per week of a company in your circle of competence. If you want exceptional results, you must put in the skillful effort that others are too lazy to do.
Rule #5: The slow game (Compounding as the 8th Wonder)”
“He never tried to get rich quick… when going slower would produce a more certain and ultimately far more lucrative result.”
The most dangerous phrase in investing is “this time it’s different.” Whether it’s the crypto craze or the frenzy in penny stocks, everyone is looking for the instant gain. Klarman points out that value investors like Buffett get excited by the “inexorable math of compounding capital over the long run”. Compounding is the eighth wonder of the world, and its greatest enemy is interruption.
To win the long game, you must survive the short game. Act as if you only have 20 investment punches for your entire life. This forces you to be mathematically intelligent and selective. If you only had 20 choices, would you really waste one on a speculative tip by a neighbour?
Buffett didn’t spend his wealth on fancy cars, yachts, or expensive art. He treated his wealth like a pile of poker chips to be used for more compounding.
So, wait patiently for a ‘fat pitch’. If the Indian market is currently overpriced, do nothing. As Klarman says, Buffett “never allowed himself to drift from his disciplined approach”.
The Klarman – Buffett way of building wealth
Seth Klarman calls Warren Buffett’s retirement the “waning of a north star.” But he also articulately proves, the values Buffett epitomized – humility, high integrity, and plain old common sense, are not outdated. They are the blueprint for anyone looking to navigate the next 75 years of the Indian markets.
Buffett’s success wasn’t about being a brilliant artist or a record-setting athlete. It was about a low-key, midwestern type of brilliance that focused on the mundane art of making informed decisions and sticking to them. As we enter 2026, the question for Indian investors isn’t who is the next Buffett, but rather, “Are you disciplined enough to follow the path he already cleared?“
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, he was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks/securities/funds discussed in this article.
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