Currently ranked number 6 in Forbes Billionaire 2021 and the world’s 7th wealthiest person with a net worth of over $100.6 billion, Warren Buffett has become a household name when it comes to investing. Also known as the Oracle of Omaha, Buffett is one of the most popular and successful investors of all time. Here are some first-hand tips from Warren Buffett himself on the topic of making smart and rewarding investments.
Never Lose Money
Although it’s impossible to physically never lose money when investing, you can always have a mindset of a sensible investor. Don’t go into an investment with luck. Enter it through knowledge. Warren Buffett only invests in companies that he thoroughly researches and understands. As an investor, once you go into an investment prepared to lose, you’ve already sealed your fate.
Don’t Forget Rule Number 1
Through his many years in the investment sector, Warren Buffett believes that the most important quality for an investor is temperament, not intellect. The stock market will definitely experience good and bad swings but you need to stay focused on your goals. In fact, Buffett rarely changes his long-term investing strategy no matter what condition the market is under.
If the Business Does Well, the Stock Eventually Follows
From the book “The Intelligent Investor” by Benjamin Graham, Warren Buffett was absolutely convinced that investing in a stock equates to owning a piece of the business. Part of his process in stock trading is seeking out businesses that exhibit favorite long-term prospects. If the company’s share price is trading below expectations for its future growth, then it might be a stock that Buffet (and you) may want to own.
It’s Far Better to Buy a Wonderful Company at a Fair Price Than a Fair Company at a Wonderful Price
With stock trading, the ideal scenario would be buying quantity stocks at the lowest possible price. To pick stocks well, you as an investor must first set criteria for uncovering good businesses and stick to them. The ultimate goal is finding the right company at the right price within a margin for safety against unknown market risk. Always remember, successful investors, can tell the difference between the price you pay for a stock and the value you get.
Our Favorite Holding Period is Forever
A popularly googled question among stock traders is how long should I hold a stock? Warren Buffett answers this question by saying that if you don’t feel comfortable owning a stock for 10 years, then you shouldn’t own it for 10 minutes. Unless a company has suffered from a sea change in prospects, such as impossible labor problems or product obsolescence, a long holding period will keep an investor from acting too human. What can destroy a portfolio appreciation, in the long run, is being too fearful or too greedy.
The amazing thing is that whether you’re a newbie or an expert, you can apply all of the Buffett rules to everything you’re potentially investing in. These tips are powerful tools for successful investments.