Investors

10 Golden Nuggets of Advice from Warren Buffet, the Most Successful Investor in the World

Who doesn’t know Warren Buffett, the smartest investor and third richest person on the planet?

He is also known as the “Oracle of Omaha”. With a net worth of more than $84 billion as of 2018, he is one of the richest persons in the world.

Warren Buffett is widely respected for his investment advice as he has accumulated all his wealth through investments.

In this biography of Warren Buffett, you will also get his golden advice for the investors, who want to make a fortune out of stock market investments.

So, read on.

Early Life

Warren Buffett was born in 1930 in the US state of Nebraska. He exhibited brilliant business acumen right since his childhood days and launched Buffett Partnership Limited in 1956.

In 1965, he took over a company known as Berkshire Hathaway, which is his proprietary business even today.

For his investment business, he is focused on sectors such as media, energy, insurance and food and beverages, which are considered to be quite conservative industries.

His conservative approach to investment led him to become the richest man in the world.

He is also a noted philanthropist, who has already donated around $28 billion in charity.

In 2018, his net worth was estimated to be $84 billion.

How Warren Buffett REALLY Made 85 Billion Dollars 

Buffet’s strategy

Warren Buffett is known to invest in conservative stocks, which are undervalued. He doesn’t look at the stock price. Rather, he prefers to invest in quality businesses, which have a proven track record of high dividend and returns.

He bought several assets in media companies such as the Washington Post, oil companies such as Exxon; and insurance companies such as GEICO.

He is also a part of the board of directors at various companies, such as Coca-Cola, Gillette, Graham Holdings,Citi Group and Apple, etc.

Education and career

Buffet graduated from the University of Nebraska with “business” as major and later on received a Master’s degree in economics in 1951 from Columbia University.

Later on, he enrolled in the New York Institute of Finance, where he learnt about stock market.

He had earned huge sums of money (estimated to be more than $10,000) from his childhood businesses, when he was barely in his 20s.

When Warren Buffett read the book,“The Intelligent Investor” by Benjamin Graham, his professor at Columbia University in 1949, he started selling securities. He also worked as an analyst with his mentor at Graham Newman Corp.

Philanthropic activities

Warren Buffett had made the largest act of charity in the history of US in 2006, when he announced that he would give away all that he had earned.

He also announced that 85% of his fortune is supposed to go to Bill and Melinda Gates Foundation.

In 2010, he formed the “Giving Pledge Campaign” along with Microsoft’s Bill Gates to rope in the richest people on earth to give their wealth for philanthropic causes.

Warren Buffett On Investment Strategy | Full Interview Fortune MPW

Warren Buffet’s Golden Investment Tips

Historically, investment has been considered a puzzle that frightens new investors even now.

If you are looking for investment tips that are time-tested and proven, go through the following investment tips given by Warren Buffett.

According to experienced investors and equity research analysts, any of the mistakes you might have made can surely be traced to at least one of the tips given below.

It means it’s a treasure house of advice for both the novice and the experts.

Warren Buffett: Latest Portfolio

To succeed in the complicated world of stock investment, many investors are curious to know the latest portfolio of investment genius Mr Buffet.

For them, we have found a link online, where they can see his latest portfolio.

Click the link below to see it.

BERKSHIRE HATHAWAY PORTFOLIO TRACKER

A more clear sector-wise picture of his portfolio is available here.

Warren Buffett’s BEST Piece Of Advice (FOR BEGINNERS)

Investment Tips, Advice, Documents and Resources From Warren Buffet

The New York Times best seller “The Warren Buffet Way” by Robert Hagstromis ultimate book to learn investment strategy of Mr Buffet.

Download the free PDF version of the book “The Warren Buffet Way”

A letter to his shareholders – 2018

The inside story of Warren Buffet

4 Simple Tools to Invest Like Warren Buffet

A Warren Buffet Styled Investment Checklist

10 Top Investment Tips from Warren Buffet

According to Warren Buffett, investment in stock market is the best decision you can ever make, whereas if you are investing in bonds or mutual funds, you are actually cutting down on your profits in terms of brokerage commission and taxes.

So, follow this advice and achieve your financial goals through stock market.

1. Invest in The Stocks You Are Familiar with

Never go for complex stocks or the stocks that you do not understand.

There are successful investors out there, who have never worked on more than a few different stocks and yet they have earned huge money through that.

Warren Buffett says, “Never invest in a business you don’t understand.” 

For example, it is very difficult to understand or predict how many drugs will be approved by FDA produced by a biotechnology startup.

Regardless of how good this company sounds on paper, stay away from it.

You can deal with many challenges related to investment, if you operate within your circle of competence.

2. Put Business Quality on Top

While the first tip can be easily understood and you can stay away from the stocks of the industries you do not understand, it is a daunting task to identify the businesses that can be termed as high quality.

Warren Buffett’s entire philosophy behind investment lies in his ability to invest in high quality businesses.

He has done it for decades before becoming a billionaire. People generally tend to buy stocks at cheaper prices without questioning the business quality, and this can turn out to be a big mistake Warren Buffett warns.

The problematic businesses will always be problematic. So even if you find them a steal at some point of time, stay away from it.

“It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”–Warren Buffett 

Rule to Follow: Check return on invested capital

A simple rule to follow to identify which business can be termed as a quality business is to look for its return on invested capital.

If it is high, then in future, the total returns will compound and it will be much higher than a business with low returns.

So, the simple formula is —Don’t look at the stock’s current dividend and earnings, look at its business quality.

3. Buy a Stock That You Can Keep Forever

If you are buying the stocks of a high quality business, forget about how long to held it.

“The minimum stipulated time to hold a stock must be at least 10 years, if you can’t do that, don’t even buy it for 10 minutes”, says Warren Buffett.

If you want to become a successful investor, invest in stocks with stable returns on invested capital.

Remember patience yields its dividend over a long period of time, so make time your best friend.

“The stock market is designed to transfer money from the active to the patient.” Warren Buffett 

Warren Buffett: Investment Advice & Strategy

4. Avoid over diversification

The basic fundamental to invest in the stock market is that you must know the great companies that are offering their stocks at reasonable prices.

It can be disastrous to invest in hundreds of companies you can’t keep tab on.

Mutual funds do the same mistake and therefore they hardly yield sustained earnings.

Focus on a smaller number of holdings that you think possess business quality.

Sooner or later good opportunities will come your way.

5. Don’t pay too much attention to news; it can be noise

Most financial news is distracting and not based on concrete facts.

If you are an active investor, it is likely that you are receiving abarrage of news items, both on the web and on TV.

The prime objective of such news items is to generate buzz and prompt people to take the desired actions.

The media is full of nonsense chatter about the market, economy and stock behavior.

People make a grave mistake to listen to the so-called experts and act on their advice.

Not all advice is useful. 99% of the investment actions are taken because of just one percent of genuine news.

Warren Buffett makes a good point here. He says, “Does it matter if the stocks of Apple, Johnson and Johnson or Coca-Cola fall by 4%.” 

However, such news can cause many investors to run in panic and sell their valuable businesses stocks, while it would be the best to hold on to the stock.

6. Investment isn’t rocket science but it is not that easy also

Many people think that highly smart, intelligent and experienced people can only be successful in this market and choose good stocks.

The good news is — Investment is not a game of IQs. It’s not true that a genius person will always take better investment decisions as compared to a person with less IQ scores.

There is also not a predefined mantra or an “easy button” that can predict the stocks valuations in future.

So your investment decisions shouldn’t be based on some historical or mathematical patterns.

There is no such system or a formula that can predict the stock values in future. So do not trust the so called gurus or experts.

The simple logic is if such a system existed, why a particular guru or an expert has to sell his advice, books and subscriptions rather than using this advice to become a millionaire himself.

As a matter of fact investment is an art and it is not easy. If someone thinks that it is easy or predictable, he must be a stupid.

7. Compare the price and value

In today’s marketplace, where you are bombarded with constant messages and ticker quotes running across your TV screen, you very well are aware of the price of a particular stock.

But, do you know the value of that particular stock?

According to Phil Fisher,“There is no dearth of people, who know the price of every stock but they don’t know the value of anything.

The volatility of stock prices can confuse you, because it is different from the underlying business fundamentals.

At times, you’ll be surprised to know that there is a zero correlation with the current stock price of a business and its long-term outlook.

It is true that the stock price of a company may fall in unfavorable business environment or economic downturn, but the same company might be working very hard to improve its competitive advantage and once the crisis is over, it can emerge even stronger.

Smart investors should never be influenced by the current stock price. What they must consider is the underlying business value of a particular stock.

The fluctuation in stock prices may be the direct impact of investor emotions, but that is a temporary phenomenon.

8. Don’t be scared if you look boring

This is another piece of wisdom from Warren Buffett.

Stock market cannot be used to get rich quickly. However, there are very good chances that you can moderately grow your capital over a period of time.

Sometimes, investment decisions may not appear exciting, however if you follow a conservative strategy, the dividend will grow slowly and certainly.

Do not gamble on a new stock or something that is new in the market. Rather, invest in the businesses that have already performed well.

Most of the investors, who burn their hands, are the people who get swayed by the tall claims of the new entrants. However, they miserably fail to fulfill their promises.

So don’t anticipate applause by the people, you must be okay with a few yawns as well, if your decision is sound.

9. Go for low cost index funds

If you are an average investor, you cannot beat the market. The major mistakes people make include

A. Defining your own timeline and expect the market to follow
B. Taking excessively risky decisions
C. Investing and trading based on emotions
D. Dealing with stocks outside of our competence or knowledge

In his will, Warren Buffett has given a clear message to his trustee.

According to him, 10% off the cash should be invested in short term government bonds, whereas 90% should be invested in extremely low cost S&P 500 index fund.

 This way the long term results will be much better than what most of the investors can achieve.

Do not even go for funds which charge you a high fee.

10. Select your business partners and managers carefully

It is very important to listen to the right people are not to the wrong people.

Also invest in a company that has the most reliable management teams.

There are many unscrupulous people in the investment world, who are ready to take advantage of the investors’ feelings of fear and greed, to make quick money.

Don’t fall into their trap.

Last but the most important advice of Warren Buffett is that — Do not pay attention to the stock forecasters, it might have little or no value.

If you want to play safely and want to earn a consistent income, cut through the noise.

Don’t trust everybody in the stock market industry.

Must read books about Warren Buffett

The most successful American investor recommends everyone to read “The Intelligent Investor” by Graham Benjamin.

This book can be termed as the bible for the investors across the world.

  1. The Snowball: Warren Buffett and the Business of LifeBy Alice Schroeder
  2. The Warren Buffett Way by Robert G. Hagstrom
  3. The Real Warren Buffett: Managing Capital, Leading People by James O’Loughlin
  4. The Warren Buffett Stock Portfolio by Mary Buffett & David Clark
  5. Warren Buffett and the Interpretation of Financial Statements by Mary Buffett & David Clark
    [Source: Wall Street Mojo]Final thoughts

The so-called gurus and investment experts have made investing look like rocket science. But, Warren Buffett has actually simplified the entire procedure.

Even the best investors realize that investment tips are not always easy to follow. But if you follow the advice of Warren Buffett, and focus on longer-term blue chip stocks, you should invest only in the industry and businesses you know.

This way you may avoid disastrous errors and will be more likely to achieve your financial goals.