Warren Buffet’s Insanely Actionable Tips On Investing That Will Change Your Life


Ready to roll in money?, because we are bringing to you some life-changing investing tips from none other than the unmatchable investor and business tycoon himself, Warren Buffet!
Also rightly known as, “Oracle of Omaha”, this man’s investment tips can forever change the course of your financial life for the better.
CEO of Berkshire Hathaway, this genius has never held himself back from sharing his investment philosophy, and what worked best for him in his shareholder meetings.
We have picked quite a few for you!
So, are you ready to hear from the man who has fixed his footing amongst the world’s top five billionaires since 2000?
Buckle yourself up!
You are up for a thrilling ride.
His best pieces of investment advice include:
1. Never Invest in What You Can Not Understand
2. Invest Where Quality is Promised
3. Don’t Be Afraid of Longer Holding Periods
4. Diversification is Not the Aim, Valuable Assets Is
5. Not All News is Worth Listening
6. Investing is Not for the Intellectuals Only
7. Don’t Confuse Price with Value
8. Never Take Cash for Granted
9. Seize the Opportunity When Others Are Fearful
10. Dividends are the Gemstones of Investment
11. Be Wise in Who You Call Your Hero
Let these best investment tips illuminate your path to financial success!
Ready to dig deeper?

1. Never Invest in What You Can Not Understand

This sounds like simple advice derived purely from common sense, yet it is not so common!
It is rather a typical mistake among most investors to be blinded by the anticipated profits and invest in companies they don’t know about.
Warren Buffet advises against it.
“Never invest in a business you cannot understand.”, he recommends.
Warren himself restrained from investing in the technological niche since he did not understand the drivers behind the high-tech giants but this only proved beneficial in a longer run, I mean look at where he is standing today!
This may sometimes mean letting go of golden opportunities as well, but relying on your sixth sense for a valuable investment is not an intriguing idea.
This is like a guy with a staunch background in the technological industry, suddenly deciding to invest in the agricultural sector.
Imagine the outcomes!
However, it is not difficult anymore to know a company and its projected growth.
If you clever enough and understand the financial documents of a company, you can gain considerable knowledge about it before investing.
You can also turn to financial advisors for this purpose.
The key is always to make informed decisions.

2. Invest Where Quality is Promised

While giving investing tips for beginners, Warren always stressed on going where growth and quality are promised rather than buying something because it’s cheap right now.
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”, he believed.
But identifying companies and businesses working towards quality is not an easy task.
It requires extensive and profound research and determination to do that research.
Warren Buffet’s investment strategy has been aligned with this notion ever since he experimented with buying a business when prices looked inexpensive only to find out that such companies generally earn low returns and wear down the original value of the investment.
This might come as a bit of a blow, but the ever famous Berkshire was in the textile manufacturing industry, looking reasonably cheap when Warren bought it.
Always keep an open eye to a business’s return on invested capital. Companies with high returns on their invested capitals are more likely to multiply their earnings; hence the margin of profits is worthwhile.

3. Don’t Be Afraid of Longer Holding Periods

One of the finest pieces of advice for investors coming from Warren buffet is,
“If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.”
Ponder over it for a minute and let it sink in.
This is against our temptations of active investing, isn’t it?
But what’s the catch?
According to Warren Buffet, businesses usually earn high returns and increase in value over time.
Sometimes even decades. Warren himself has had some of his positions for some considerably longer periods.
He has always advocated for a buy-and-hold mentality because getting hold of businesses that are performing fine and are anticipated to continue doing well is a challenging task.
For this reason, we have heard him saying,
“Our favourite holding period is forever.”
Constant buying and selling can indulge you in excessive taxes and trading commissions, ripping you off the valuable returns.
Remember, patience is always rewarded.

4. Diversification is Not the Aim, Valuable Assets Is

Diversification is the key to investment success. This is what we have always learned and believed.
But not Warren Buffet!
According to him, “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”
He believes that only the people who are not sure about what they are investing in goes for several investments.
Instead of investing in numerous average businesses, go for a business you are familiar with and offer favourable long-term economic characteristics with good management.
‘’We feel quite comfortable concentrating our holdings in the much smaller number that we do identify as attractive.”, He declares, explaining his investing strategies.
Unnecessary Diversification means that you will be unable to keep up with 100 stocks you have bought across companies, how current circumstances are affecting them, and what should be your right investment move.

5. Not All News is Worth Listening

Do not take everything you hear about the stock markets and economic situations on the news seriously.
Honestly, most of it is only to stay in the limelight and trigger our emotions to make us act spontaneously and often irrationally.
This harms investors like no other thing! Acting upon the groundless and often exaggerated comments of pundits and fellow investors.
Warren Buffet went to great lengths in elucidating this,

“Owners of stocks, however, too often let the capricious and often irrational behaviour of their fellow owners cause them to behave irrationally as well. Because there is so much chatter about markets, the economy, interest rates, price behaviour of stocks, etc., some investors believe it is important to listen to pundits – and, worse yet, important to consider acting upon their comments.”
The stock market is highly unpredictable. One should be really cautious of what he listens and even more on what he chooses to act upon.
Always ask yourself, “Is this piece of news going to affect my company’s earnings in the long-term?’’
The answer will tell you the significance of the news for you.

6. Investing is Not for the Intellectuals Only

It is a universally held idea that only a person with a powerful intellect can thrive in the investment world.
While it can be accurate to some extent, investment is not rocket science!
Warren Buffet’s investment strategy for beginners is never to depreciate yourself but also not to expect an easy road ahead.
“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 the 130 IQ.”, He mentioned.
Provided the unpredictability, the investment can be both easy and difficult, irrespective of a beginner or an intellectual.
Don’t be fooled by the self-proclaimed gurus, selling you the model-based formulas in the promise of success.

7. Don’t Confuse Price with Value

Warren Buffet has always stood for value investing.
It’s when you invest in a company that is undervalued as compared to its true value but is going to surprise you in the future.
Obviously, you don’t jump blindly at it.
The tactic is to look at the company’s fundamental upholding and calculate the intrinsic value by going over the financial statements of at least the previous five years.
Also, look for a company working on a product that has the potential to grow. This could be your judgment call or based on market trends. All of this can add to the intrinsic value.
“Price is what you pay. Value is what you get.”, He reminded.

8. Never Take Cash for Granted

Someone as rich as Warren Buffet wouldn’t go out without cash.
And so shouldn’t you!
When inquired about this, he explained,
“so that we can both withstand unprecedented losses and . . . quickly seize acquisition or investment opportunities.”
This is one of his famous investing advice. All investments and assets aside, he considers cash to be the king. The true means for you to start building upon.
In his letters to shareholders in 2011, we find him highlighting the importance of carrying cash.
“I have known a great many people who at some time or another have suffered in various ways simply because they did not have ready cash . . . I hope it never happens to you.”
When you have everything in the form of assets and investments, you cannot seize a profitable opportunity at the right time.
Imagine, not being able to buy a valuable stock cheap, in times of financial crisis because everything you own was tied up to investments.

9. Seize the Opportunity When Others Are Fearful

“Be fearful when others are greedy and greedy when others are fearful.”
This is one of the most famous quotes of Warren’s while giving tips on investing in stocks.
When everyone is behind a sock, it usually means that the stock is overvalued. Instead, go after value investing. Look for undervalued stocks and if the fundamentals look fine, go for it instead.
Remember, value over Price.

10. Dividends are the Gemstones of Investment

Warren Buffet has always loved dividends and considered them the undervalued gems of investment.
Dividends are the payments made by companies to the investor as a reward for putting their money in the company.
If a company has a past of paying out dividends, it usually means that it is thriving well.
They are a valued return on your investments. Always look for companies that have a habit of increasing their dividends over time.

11. Be Wise in Who You Call Your Hero

Who do you call your hero can say a lot about yourself, your beliefs, the ideas you hold dear, and not to forget your investing style and strategies.
He said, ‘’tell me who your heroes are, and I will tell you who will turn out to be.’’
This is applicable to all aspects of life but holds true in investment too.
Choose your heroes wisely because they inspire you to take their course of action.
When you follow successful heroes, with practical strategies, you are more likely to flourish too.
Warren Buffet attributes his success to his heroes while saying,
‘’The best thing I did was choose the right heroes.’’

In Conclusion

Investment should not be as hard as we have made it sound.
Apply these valuable yet simple investing tips by Warren Buffet in your investments right now and see the difference in a few years.
Remember what he said about not letting the apprehensions from the financial news undermine your judgments.
Always be aware of what you are doing and where you are investing.

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ABOUT THE AUTHOR

Jun Sing Tan

I help young adults and working professionals achieve their financial goals with a full suite of risk management and wealth accumulation solutions. I firmly believe that financial education should be easy and achievable for all. I am committed to service and hope to be your one stop financial solution.

author

Jun Sing Tan

November 23, 2020

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