According to him, there are many rules to win the game. The first rule is not to lose. The second rule is not to forget the first rule.

Mistakes? An investor needs to do very few things right as long as he or she avoids big mistakes.

Want high value? Focus on return on equity, not earnings per share. Calculate "owner earnings" to get a true reflection of value.

How to choose the right companies to invest? In the 2007 letter, he says Charlie and I look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag.

We like to buy the whole business or, if management is our partner, at least 80 per cent. When control-type purchases of quality aren't available, though, we are also happy to simply buy small portions of great businesses by way of stock market purchases. It's better to have a part interest in the Hope Diamond than to own all of a rhinestone.

What makes a great biz? Look for companies with high profit margins. A truly great business must have an enduring 'moat' that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business 'castle' that is earning high returns. When to say Yes and No? The ability to say 'no' is a tremendous advantage for an investor.

Want great results? Always invest for the long term. It is not necessary to do extraordinary things to get extraordinary results.

Flashy degrees? No, we need good brains! Buffett doesn't believe in flashy degree and titles: He says, Susan came to Borsheims (jewellery shop) 25 years ago as a $4-an-hour saleswoman. Though she lacked a managerial background, I did not hesitate to make her CEO in 1994. She's smart, she loves the business, and she loves her associates. That beats having an MBA degree any time. Charlie and I are not big fans of resumes. Instead, we focus on brains, passion and integrity, he says.

Great managers? One of our great managers is Cathy Baron Tamraz, who has significantly increased Business Wire's earnings since we purchased it early in 2006. She is an owner's dream. It is positively dangerous to stand between Cathy and a business prospect. Cathy, it should be noted, began her career as a cab driver.

In Berkshire's 1977 annual report, Buffettt described the central principles of his investment strategy: "We select our marketable equity securities in much the way we would evaluate a business for acquisition in its entirety. We want the business to be one (a) that we can understand; (b) with favorable long-term prospects; (c) operated by honest and competent people; and (d) available at a very attractive price."

The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price. Buy companies with strong histories of profitability and with a dominant business franchise.

Weigh the pros and cons: Be fearful when others are greedy and greedy only when others are fearful. It is optimism that is the enemy of the rational buyer.

A success mantra? Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.

Image: Warren Buffett appears on the Charlie Rose Show in the Bloomberg Building in New York.