Eight investment tips from Warren Buffett
Written by Carl Turner on March 30, 2017.
Warren Buffett is considered to be the world’s most successful investor. Dubbed the ‘oracle of Obama’ he is currently third on the Forbes Billionaire’s list with a fortune valued at $72.7bn, greater than the GDP of Luxembourg! His advice on investing is probably worth listening to!
Here are some titbit and soundbites from the man himself which give an insight into his investment strategy. I’ve extrapolated some simple lessons that you can take from them to apply to your own investment strategy:
‘Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.’
Inflation will erode your cash savings. You will be losing money if you don’t keep your savings in investments earning at least the rate of inflation.
‘Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.’
Buying and holding shares over the long term will almost certainly give you a decent return.
‘Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.’
Invest in tried and tested businesses with a proven track record rather than being seduced by gimmicky newcomers with promised returns that seem too good to be true. They probably are.
‘The best thing that happens to us is when a great company gets into temporary trouble…We want to buy them when they’re on the operating table.’
Good companies going through temporary difficulties are a good investment.'
‘Someone is sitting in the shade today because someone planted a tree a long time ago.’
Investing is most successful when it is done over the long term. The more time compounding has to work its magic, the better.
‘We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.’
Investors aim to buy low and sell high but you will almost certainly be mistiming your investment decisions and doing the opposite if you follow the herd when buying and selling.
‘Do not save what is left after spending but spend what is left after saving’
Saving is important for future financial security but to succeed you need to make a conscious effort to do it. Determine an exact amount that you will save consistently every month and as your income increases, make sure your savings increase too.
‘You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.’
Anyone can invest regardless of how clever or educated they are. The key is to work out a long term strategy and stick to it.
I can’t guarantee that you’ll be joining Warren on next year’s Forbes list if you follow this advice, but I can guarantee that you will be well on the road to securing a sound financial future.