Warren Buffett’s Best Investment Tips for Beginners
Warren Buffett is generally considered to be the best long-term investor of all time, 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 Best Investment Tips.
Longer term view
Warren Buffett says money doesn’t grow overnight. ” No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant. ” So your investment planning should be done by considering longer terms goal. People go for futures and options with the hope of making quick money but they are actually the one who loses more money than average investors. Warren Buffett never did intraday or positional trading. Warren Buffett also says if you can’t own the stock for 10 years don’t even own it for 10 minutes.
Don’t invest in a company whose business you don’t understand
Many people invest their money just by hearing anything good about the particular company from others. By understanding the business, you can determine if there will be any associated financial problems in the future. There are many companies in the stock market whose business can be understood by any normal people.
Think like an owner
Thinking like an owner changes your whole perspective on stock investing. Warren Buffett says if you are going to own a new car, you will think about its fair valuation, you will think about its features and you will compare it with cars offered by other manufacturers from the same segment. Then after checking everything, you will decide which one to buy. Likewise, you should have the same perspective with stocks.
You can buy anything by taking loans and borrowing money, but you become rich by living on borrowed money. People initially think that they can manage their debts but not everyone can do so. One needs to have a solid plan to pay the debt back and not become its lifetime slave. A debt-free life is the best life. Warren Buffett says I’ve seen more people fail because of liquor and leverage – leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.
Warren Buffett says “be fearful when others are greedy, and greedy when others are fearful.” That means buy when there is panic in the market when everyone is bearish. Sell when everyone is bullish on the market. Most of the people fail to follow this because of excessive fear when the market is going down and excessive greed when the market is going up. When the market is going up everyone speaks only about the positive side which increases the greed that makes people to carry their long position and also to take the fresh position at higher levels. Fall from the higher levels is always very intense and most of the traders lose money.
The same goes when the market is falling down. During panic all experts and media talks only about the negative side. They speak as if the market will always continue to fall forever. People keep waiting for the stocks to become cheaper and ultimately miss the right opportunity to buy.
Don’t keep the loss-making shares.
If the fundamentals of the stocks become poor, exit it immediately doesn’t wait for anything and never average it. And stay invested if the fundamentals and future prospects are strong. Don’t be in rush to book small profit in such stocks.
Prefer quality stocks than cheap stocks
A lot of investors buy stocks just because they are cheap without understanding that cheap is not always better. Buffett learned from Charlie Munger that “it is far better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price.” Chances of losing money in cheap stocks are very high compared to investment in a fairly valued stock
Stay away from hot stocks
Some stocks always remain in news and grab the attention of many. Stay away from such stocks which are highly volatile. Warren Buffett once said, “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
Always be prepared for the worst
A stock market is a place where nothing is certain. So always be prepared for the worst. Many tragedies can happen overnight that can destroy your capital. Problems don’t give any warning before coming. Always save some funds for emergencies and never expose your full capital in any investment option.
6 thoughts on “Warren Buffett’s Best Investment Tips for Beginners”
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