Investment tips from Warren Buffet
These investment tips are a compilation of investment advice from Warren Buffet over time, especially during interviews. These are consistent with what other great investors and authors have identified.
One of the key points of Warren Buffet for an individual to become a successful investor is to gain experience. To gain that experience, he has the following advice particularly for beginners:
Have the Confidence to Be a Successful Investor
Buffett believes that one of the important aspects of investing is to trust your investment decisions which help to build confidence over time. Also, study, understand, believe and never look down on yourself, hence, don’t consider yourself as inferior to others.
The above is very particular to investors that want to be successful to overcome fear and not to follow the crowd. More importantly, acquire knowledge to make sound investment decisions that will stand you out from the crowd.
Diversification, not necessarily a good investment idea
One unique advice from Buffet that is quite different from the opinion of many successful investors is that diversification may not necessarily be a good idea. His argument is on the basis that investors should have faith in their investment portfolios. Also, he emphasized that in as much as diversification helps to reduce the volatility investment portfolios, it does aid the decrease of an investor’s focus on individual investments.
Develop Yourself First
There is a general consensus among some of the most successful people in the world, Buffet inclusive, that one of the best investments an individual can make is to invest in himself/herself. Do anything you can to develop your abilities or business to be more productive. An important obvious fact that Buffet made in one of his interviews was that not everyone will be a successful investor or business owner, some will become prosperous in their career, therefore, commit more resources and time towards your growth and development.
Invest in What You Understand
One important guiding principle of Buffet is not to invest in businesses you don’t fully understand. For example, he stated that he always has to understand the company he wants to invest in especially how the company makes money and key indicators that drive the company’s industry in about ten minutes and if he doesn’t understand, he shifts his attention to another company.
He further warns new investors not to invest in businesses that require an accurate forecast of the future, hence, they look for another business to invest in.
Learn from Your Mistakes and Move On
The key takeaway from this particular point is that no one is above mistakes as Buffet made some mistakes too but the significant thing is the learning outcome of the mistakes. The bottom line is don’t be afraid to make mistakes and learn from those mistakes if you make any as you become a better investor through that.
Be a Long-Term Investor
For Buffett, this is one important strategy to earn a better return on investment. The ability to invest in a company’s stock for 10 years is key to earn more as it is not wise to be an investor that trade often as your earnings will be swept away in form of taxes and commission.
- He further stated that there are two principles behind this:
When an investor purchases a company’s stock for less than it’s worth, the stock’s price will eventually converge with the intrinsic value.
- The value of a company’s stock compound and increase exponentially when it held on too long enough. Therefore, it is pertinent to be patient as an investor because the reward is in the long-term.