Warren Buffett’s 1957 letter to investors: 7 timeless lessons for Indian investors

There was simply an investment partnership, a young investor and a clear idea of how he wanted to manage other people’s money.

In his 1957 letter to the limited partners of his investment partnerships, Buffett wrote about something that sounds surprisingly familiar even today: markets that may be expensive, investors who remain optimistic despite falling prices, the difficulty of finding good investments and the need to wait patiently for the right opportunity. Though, his first letter to Berkshire Hathaway shareholders came later, in 1965.

What Buffett wrote in 1957 was his annual letter to the limited partners, sent when he was still years away from taking control of Berkshire. In it, he wrote about something that sounds surprisingly familiar even today: a market that looked expensive, investors who stayed optimistic despite falling prices, the difficulty of finding good investments and the need to wait patiently for the right opportunity.

The letter is about 70 years old. It was written for a very different market and in a very different investment environment. Buffett was also using strategies and terms that are not directly applicable to an ordinary Indian mutual fund or stock market investor today. But beneath those details are several ideas that remain relevant.

The biggest message is perhaps this: Buffett was not trying to predict what the market would do next. He was trying to find investments that offered enough value for the price being paid.

That distinction can still matter to an investor sitting with a demat account or mutual fund portfolio today.

First, a little-known chapter of Buffett’s investing journey

Before Warren Buffett became synonymous with Berkshire Hathaway, he was already deeply interested in investing. He studied under Benjamin Graham at Columbia Business School and later worked at Graham-Newman. Graham’s approach had a major influence on Buffett’s early investment thinking, particularly the idea of looking for securities selling below what they were worth.

Buffett returned to Omaha and in 1956 started Buffett Partnership Ltd. with money from family and friends. He was 25 at the time, and the 1957 letter came during these early years, before the polished style of his later Berkshire shareholder letters. He was not writing to a huge shareholder base. He was explaining to a relatively small group of partners what he was doing with their money and why.

The tone is also revealing. He does not promise that the market will rise, try to predict the next big economic boom, or claim that every investment will work. Instead, he explains where he thinks opportunities exist and why he is prepared to wait. That mindset runs through much of Buffett’s later career, in which he repeatedly describes shareholders as partners and stresses long-term ownership over short-term price movements.

What Buffett was saying in 1957

One of the first things Buffett told his partners was that he considered the general stock market to be expensive, trading above what he thought was its intrinsic value. But there is an important point here: he was not building his entire strategy around predicting a market crash.

He specifically said that market analysis was not his main focus. His primary attention was on finding securities that were substantially undervalued.

That is a subtle but important difference. Buffett could have spent his time trying to answer one question: will the market go up or down? Instead, he was asking another question: can I find something worth more than the price at which it is available? That is the starting point for the lessons Indian investors can take from this letter.

7 lessons Indian investors can still use today

1. Don’t make the market forecast the centre of your investment strategy

Buffett openly said he did not try to forecast either the economy or the stock market. This is striking because investors spend enormous amounts of time trying to answer questions such as: Will the market fall? Is a bull market coming? Will interest rates rise? Will the economy slow down? Should I wait for a correction?

Buffett’s approach was different. He acknowledged that the market could rise or fall, but he did not want his entire investment process to depend on getting that call right. His focus was on finding investments that appeared cheap relative to their underlying value.

For someone investing through SIPs, mutual funds or stocks, the lesson is not that market cycles do not matter. They do. The lesson is that trying to correctly predict every market cycle is extremely difficult. An investor building wealth over 10, 15 or 20 years may be better served by having a clear asset allocation and investment process rather than repeatedly changing investments based on predictions about the next correction. Buffett’s letter was written for a very different investment strategy, so this should not be read as a recommendation to copy his 1957 portfolio. The broader lesson is about discipline.

2. A falling market can create opportunities

Buffett noted that the decline in stock prices had created more opportunities among undervalued securities. For many investors, a falling market means danger. For Buffett, a fall in prices could also mean that some securities had become more attractive.

There is an important condition, though. A lower price does not automatically mean a good investment. The investment has to be worth more than the price being paid. That is the difference between buying something simply because it has fallen and buying it because the underlying value appears greater than its market price.

When markets fall sharply, investors often face two opposite emotions. One group becomes scared and wants to sell everything. Another assumes that every fallen stock is now a bargain. Neither reaction is necessarily correct. A fall in price should lead to a fresh question: has the investment become more attractive, or has the underlying business become weaker?

3. Price and value are not the same thing

The idea of intrinsic value runs through Buffett’s letter. In simple terms, intrinsic value is an estimate of what an investment is actually worth based on the economics of the underlying business and its future ability to generate cash and profits. The market price can be above or below that value, and this idea later became one of the defining features of Buffett’s investment philosophy.

The important point for ordinary investors is not that they must calculate an exact intrinsic value for every stock. It is that a stock price by itself does not tell you whether an investment is cheap or expensive. A Rs 500 stock is not necessarily cheaper than a Rs 5,000 stock. A stock that has fallen 40% is not automatically a bargain, and a stock that has doubled is not automatically expensive. The underlying business matters.

4. Patience can be an investment advantage

One of the clearest messages in the letter is Buffett’s willingness to wait. He said that some of his investments could take three to five years to play out.

He also made an even more interesting observation. During the period in which he was building a large position, he would actually prefer the stock price to remain unchanged or even fall rather than rise. Why? Because he wanted time to buy more at attractive prices.

This is very different from the way many investors think. Investors usually want their stocks to rise immediately after they buy them. Buffett was thinking about the value of the entire investment process rather than the satisfaction of seeing a quick gain.

For Indian investors, this is particularly relevant in a market where investors can see prices every second on their phones. A long-term investment does not need to produce a profit every week or every month. Sometimes the most important part of investing is simply giving a good investment enough time to work.

This does not mean holding every losing investment forever. It means not confusing a lack of short-term price movement with a failed investment thesis.

5. Short-term performance can be misleading

Buffett made an unusually honest observation about the performance of his partnerships. One partnership had done much better than the others. At first glance, this might have suggested that the manager had done something dramatically different. But Buffett explained that timing played a major role.

The partnership that received money later was able to invest when the market was lower and certain securities were more attractive. The earlier partnerships had already invested much of their money, so the newer partnership was able to take larger positions in some attractive investments. The underlying portfolios were broadly similar. The difference in returns was partly about when the money arrived and what opportunities were available at that time.

One year of investment performance does not tell the whole story. This matters today when investors compare mutual funds, fund managers or their own portfolios. A fund that tops the charts in one year may not remain there. Similarly, an investor who starts investing just before a market rally can have a very different short-term experience from someone who starts just before a correction. Timing can influence short-term returns, but that does not necessarily tell us who is the better investor.

6. Don’t judge an investment strategy without understanding the market environment

Buffett went one step further and cautioned his partners against reading too much into their strong performance in 1957. Why? Because the market had fallen, and he believed his strategy was more likely to outperform during a weak market than during a strong one. Therefore, a year of strong relative performance should not automatically be treated as proof that the strategy would outperform in every environment.

This is a remarkably useful lesson for today’s investors. Suppose a fund has delivered 25% in one year. The obvious reaction is to ask: should I invest in this fund?

But a better set of questions would be: How did it perform against its benchmark? What happened to the broader market during that period? Was the performance driven by a particular sector? Was the return the result of a one-off event? How has it performed over a longer period? What level of risk did the fund take to generate that return? Buffett’s letter shows why returns need context.

7. Sometimes doing nothing is part of investing

Perhaps the most powerful lesson in the entire letter is also the simplest. Buffett was comfortable waiting. He wrote that some of the more attractive investments could only be acquired with patience. This is easy to say and difficult to practise.

Investors often feel they must constantly do something: buy a new fund, sell an old fund, switch to the latest theme, change the portfolio after a market correction, increase exposure after a rally. But investing does not always reward activity. Sometimes the best decision is to wait until the price and opportunity make sense. That was already visible in Buffett’s investment philosophy in 1957.

What Indian investors should not copy from Buffett’s 1957 letter

It would be wrong to read this letter and conclude that Buffett was simply telling ordinary investors to buy undervalued stocks. His 1957 partnerships were using a specific investment approach. He divided investments into categories such as general issues and work-outs. A work-out was an investment where the expected return depended on a specific corporate event such as a merger, liquidation, sale or tender offer. That is very different from simply buying a diversified mutual fund and holding it for the long term.

Indian investors should therefore learn from the principles, not blindly copy the strategy. The market structure, regulations, available investment products and investor needs are all very different today. The value of the letter lies elsewhere: in how Buffett thought about price, value, risk, patience, performance and uncertainty when he was still a young investment manager.

The Buffett lesson hidden between the lines

Perhaps the most interesting thing about the 1957 letter is what Buffett does not do. He does not present himself as someone who can predict the future. He does not tell his partners that the market will definitely crash, or promise that every investment will work, or hide behind one year’s performance. Instead, he explains his thinking. He tells investors what he believes, where the risks are, why returns can differ, and that patience is necessary.

That approach became an important part of Buffett’s relationship with investors over the decades. When he later wrote his Berkshire shareholder letters, the partnership language remained. Berkshire’s own materials describe Buffett and Charlie Munger as treating shareholders as owner-partners and measuring success by the long-term progress of the business rather than short-term movements in its share price.

Why this 1957 letter still matters in 2026

More than six decades later, Indian investors have access to tools Buffett could not have imagined. They can start a SIP with a few hundred rupees, buy index funds, track portfolios on a phone, invest in stocks with a few clicks and watch market prices update every few seconds.

But technology has not changed some of the basic problems of investing. Investors still have to deal with fear when markets fall. They still chase returns after a stock or fund has already done well. They still try to predict market movements, still confuse a low price with a cheap investment, and still find it difficult to wait.

Buffett’s most useful lesson was not about a particular stock, market or investment product. It was about how to think when the future is uncertain. For an Indian investor, that may be the most valuable lesson of all: he was not trying to know what the market would do next. He was trying to make sure that when he invested, he was paying less than what he believed the investment was worth. That idea is old. But for investors in India or anywhere else, it is hardly outdated.

Disclaimer: This story is based on Warren Buffett’s 1957 annual letter to the limited partners of his investment partnerships. The investment approach and market conditions of that period were very different from those faced by Indian investors today. The lessons discussed here are for educational purposes and should not be treated as investment advice or as a recommendation to copy Buffett’s investment strategy.