Warren Buffett is one of the most powerful investors in the world.
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Today Buffett is CEO of Berkshire Hathaway, but he bought his first stock when he was just 11.
And he’s been very, very good at it. Buffett is worth $82.5 billion, according to Forbes, making him the third richest person alive (behind Amazon founder Jeff Bezos and his friend and Microsoft co-founder, Bill Gates).
So how does he do it? Here are five of his best bits of investing wisdom.
1. Investing is a long game
“Now if they think they can dance in and out [of the market] and buy and sell stocks, they ought to head for Las Vegas. I mean, they can’t do that,” Buffett told “Squawk Box” October 2014. “But what they can do is determinate that there’s a number of solid American businesses, a great number of them, and if you own a cross section of them and particularly if you buy them over time, you basically can’t lose.”
“I know what markets are going to do over a long period of time: They’re going to go up. But in terms of what’s going to happen in a day or a week or a month or a year even, I’ve never felt that I knew it and I’ve never felt that was important,” Buffett told Becky Quick on “Squawk Box” in February 2016.
”I will say that in 10 or 20 or 30 years, I think stocks will be a lot higher than they are now. ”
Buffett has also likened buying stocks to owning more tangible assets. “If you own stocks like you’d own a farm or apartment house, you don’t get a quote on those every day or every week,” Buffett told “Squawk Box.” So, too, should it be when you’re buying a share of a company.
2. Diversify
To protect your money, buy stocks in various different kinds of companies and spread your purchases out over time.
“The best thing with stocks, actually, is to buy them consistently over time,” Buffett told “Squawk Box” in February 2017. “You want to spread the risk as far as the specific companies you’re in by owning a diversified group, and you diversify over time by buying this month, next month, the year after, the year after, the year after.”
3. Stocks are now generally better than bonds
“If you save money, you can buy bonds, you can buy a farm, you can buy an apartment/house — or you can buy a part of an American business,” Buffett said in February. “And if you buy a 10-year bond now, you’re paying over 40 times earnings for something whose earnings can’t grow. You compare that to buying equities, good businesses, I don’t think there’s any comparison.”
A 10-year government bond opened the day at a 2.32 percent interest rate and closed at 2.49 percent on Feb. 27, 2017, when Buffett made the comment. As of Dec. 17, 2018, the 10-year government bond had an interest rate of 2.87 percent.
Meanwhile, the benchmark S&P 500 Index has averaged an annual return of 10.2 percent over the past 30 years, according to FactSet.
Clearly, even as Buffett himself has said, anything can happen in markets. If bond interest rates overtake stock market returns, then this advice no longer holds. “But I would say this: If the 10-year stays at 2.30 [percent interest rate] and it would stay there for 10 years, you would regret very much not having bought stocks now,” Buffett said in February.
“The one thing I’m sure of is that overtime, stocks from this level will beat bonds from this level,” Buffett told “Squawk Box” October 2017. “Stocks [have] been so much more attractive than bonds for a long time now.”
4. You can’t time the market
“You’re making a terrible mistake if you stay out of a game that you think is going to be very good over time because you think you can pick a better time to enter it,” he told “Squawk Box” in February 2017.
5. There’s no room to be emotional
“Some people should not own stocks at all because they just get too upset with price fluctuations. If you’re gonna do dumb things because your stock goes down, you shouldn’t own a stock at all,” said Buffett told “Squawk Box” in February 2018.
By comparison, “If you buy your house at $20,000 and somebody comes along the next day and says, ’I’ll pay you $15,000, you don’t sell it because the quote’s [$15,000],” added. “Some people are not actually emotionally or psychologically fit to own stocks, but I think that more of them would be,” Buffett said, if they were more educated on what they were really buying, which is part of a business.
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5 of Warren Buffett’s best tips for investing in the stock market | CNBC Make It….(read more)
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Billionaire Warren Buffett is undoubtedly one of the most successful investors in the world. Known for his savvy investment strategies, he has amassed a considerable fortune through his company Berkshire Hathaway. With Buffett’s remarkable track record, there is much to be learned from him when it comes to investing in the stock market. Here are some top tips inspired by the “Oracle of Omaha” himself.
1. Invest in what you understand: Buffett often emphasizes the importance of thoroughly understanding the business you invest in. Stick to industries and companies that you can comprehend. This in-depth knowledge will help you make more informed decisions, identify potential risks, and seize new opportunities.
2. Long-term mindset: Buffett’s investment strategy is centered on the long-term view. He once said, “Someone is sitting in the shade today because someone planted a tree a long time ago.” Avoid short-term speculation and focus on companies with strong fundamentals that you believe will prosper over the long run.
3. Patience pays off: Buffett’s patience is legendary. He is a firm believer in taking advantage of market downturns rather than panicking. During periods of market stress, he advises staying calm and seeing them as opportunities to buy quality stocks at discounted prices.
4. Value investing: Buffett’s investment style is rooted in the concept of value investing. This approach involves identifying undervalued companies, often characterized by low price-to-earnings ratios and high intrinsic value. He emphasizes the importance of buying stocks that are trading below their intrinsic value, thereby providing a margin of safety.
5. The power of compounding: Buffett frequently emphasizes the power of compounding returns. By reinvesting dividends and allowing your investments to grow over time, you can benefit from the compounding effect. He encourages investors to start early and be patient, allowing their wealth to compound and multiply over the years.
6. Margin of safety: Buffett stresses the importance of investing with a margin of safety. This means only investing in stocks that have a substantial margin between their intrinsic value and their market price. This provides a cushion against potential downturns or unforeseen events, reducing the risk associated with your investments.
7. Diversification: While Buffett’s portfolio is often concentrated in a few key positions, he still recognizes the value of diversification. By spreading your investments across different sectors and asset classes, you can reduce the impact of any single stock or industry failure on your overall portfolio.
8. Do your own research: Buffett is known for doing extensive research before making any investment decisions. He reads widely and stays well-informed about the companies he invests in. Emulate his behavior by researching companies thoroughly, analyzing financial statements, and staying updated with market developments.
9. Stay rational, ignore the noise: Buffett urges investors to stay rational and avoid being swayed by market hype or short-term fluctuations. Emotional decision-making can often lead to poor results. Instead, base your decisions on sound analysis, patience, and a long-term perspective.
10. Learn from your mistakes: Even the greatest investors make mistakes, and Buffett is no exception. However, he believes in learning from those mistakes. Take responsibility for your investment decisions and use any setbacks as valuable learning experiences that can help shape your future decisions.
Following the advice of a successful investor like Warren Buffett can be incredibly valuable when venturing into the stock market. By investing in what you understand, adopting a long-term mindset, practicing patience, and doing thorough research, you’ll be setting yourself up for success. Remember, successful investing requires discipline, knowledge, and a willingness to learn from both successes and failures.
Given the current economic difficulties that the country is experiencing in 2023, how can we enhance our earnings during this period of adjustment? I cannot let my $680k savings vanish after putting in so much effort to accumulate them.
Is now a good time to invest in stocks? I know everyone says stocks are cheap, but how long will it take for us to recover? Obviously, there are strategies to be used in this market, but these strategies are not available to the average person, so am I better off putting my money elsewhere?
The man gives great advice but why would you not time the market? Going back to his great home example—why would you buy a house when it’s overvalued buy a 20% when you could buy it later for FMV? Don’t buy high.
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Basic:
1. Hold long, sell positive/in the green
2. Diversify (Like 10 stocks but less than 20)
3. Dollar Cost Averaging (Google it)
4. Stock are slightly better than bonds and way better than an a savings account
5. Don't time the market just keep buying in for the long term. 5 – 7 years.
If you have any questions just ask.
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