Warren Buffett is CEO of Berkshire Hathaway, but he bought his first stock when he was just 11. According to Forbes, Warren Buffett is worth $82.5 billion, making him the third wealthiest individual alive behind his friend and co-founder of Microsoft, Bill Gates, and Jeff Bezos, founder of Amazon.
“When an individual with cash meets an experienced individual, that individual with experience ends up with cash and that individual with cash leaves with experience.”.This was Warren Buffett’s response when asked about his best investment advice. Warren Buffett says that experience is the ultimate key to be a successful investor.
One of Buffett’s most famous quotes is “Be fearful when others are greedy, and greedy when others are fearful.”
Warren Buffett is considered to be one of the best long-term investors, so it’s no wonder many people like to listen closely to Buffett’s words of wisdom, in order to apply them to their own lives. With that in mind, here are Warren Buffett’s Investment Tips
Warren Buffett’s Investment Tips
Investing is long term Game
Money doesn’t grow overnight, by getting nine women pregnant you can’t make a child in a month. No matter how good the talent or attempts are, Warren Buffett is just saying some things take time.
Investment planning should be done by considering the long term goals. Investor goes for futures and options with the hope of making quick money but they are actually the one who loses more money.
Warren Buffett never did trading (Intraday or Positional). Warren Buffett also says “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for ten minutes.”
Diversification isn’t always a good idea
Many good investors say diversification is a good idea for investment in the stock market. But Warren Buffett tends to disagree with the idea.
Warren Buffett suggests diversification is for individuals who have little knowledge of investment. An experienced investor should select long-term stocks and have confidence in their investments.
“Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.” – Warren Buffett
Some investors diversify their portfolios because they are afraid that anyone stock might sink their entire portfolio; but, while doing so, it becomes much harder to keep the focus on individual investments. They may decrease their portfolio’s volatility by diversifying, but at the same moment decrease their focus on individual investments.
Excessive diversification also means that a portfolio is likely invested in a number of businesses, diluting the impact from its high-quality holdings.
“The idea of excessive diversification is madness.” – Charlie Munger
Don’t invest in a company whose business you don’t understand
This is one of the most important Warren Buffett’s Investment Tips. People invest their hard earn money just by hearing something good about a particular company from others. You can determine if there will be any related economic issues in the future by knowing the company. In the stock market, there are many firms whose company can be understood by any ordinary individual. Buffett warns you should never invest in companies you don’t comprehend completely.
Trust yourself to be a successful investor
Warren Buffett says that the hardest thing is to trust your investment decisions. You always think that others are right and you are wrong. Instead, you need to study and believe in yourself.
“I always knew I was going to be reach. I don’t think I doubted for a minute”- Warren Buffett
To be successful, you need to overcome the fear and not pay attention to what others are telling you. Accumulate understanding and create investment choices to stand apart from the crown and be a winner on your own.
Think like an owner
Warren Buffett always says in his interview, you have to think like an owner changes your whole views on stock investing. Warren Buffett says if you are going to own a new car/bike, you will think about its fair valuation, you will think about its features and you will compare it with cars/bike offered by other manufacturers from the same segment. Then you’ll decide which one to purchase after reviewing everything. Similarly, stocks should have the same view.
Prefer quality stocks than cheap stocks
A lot of people buy stocks just because they are cheap without understanding that cheap is not always better. Charlie Munger’s Buffett discovered that “buying a great company at a fair price is far better than buying a fair company at a great cost.” Chances of losing money in cheap stocks are very high compared to investment in a fairly valued stock
There’s no room to be emotional
“Some individuals are not supposed to own stocks at all because they are too annoyed by price changes. If you’re going to do stupid things because your inventory is going down, you shouldn’t own stock at all, “Warren Buffett said during a CNBC interview. Some people aren’t really mentally or psychologically fit for their own stock, but I believe more of them would be,” Buffett said if they were more informed about what they’re actually purchasing, which is composed of a company.