Practical Advice on Investing from Warren Buffett
Warren Buffett is well-recognized for his investment knowledge, and when he has something to say, people listen. His company, Berkshire Hathaway, is worth an estimated $212 billion. This alone proves that what he has to tell people about investing has value for anyone who wants to earn a decent income from this avenue. Here are a few key pieces of wisdom from Buffett for the average person looking to make investments for long-term growth.
- Cash is a bad investment.
You have to keep so much cash on hand, but it doesn’t earn you money. According to Buffett, you want to have enough so nobody else has the ability to control your future.
- Diversify your fund in the S&P 500.
Because the economy bounces back and does okay over time, total diversification is the best kind of portfolio for the average amateur investor. Don’t buy at the wrong time or price. Buffett recommends buying a cheap index fund.
- Invest in yourself first.
The best investment you can make is in your own skills. If you use your own money to develop your skills, you will end up with productive results.
- Understand any business you buy stocks in.
Buffett recommends that investors who focus on stocks should only invest in companies in industries they understand. If they don’t know anything about a particular business, they should skip it and move on to the next company. Buffett says that is what he does with Berkshire Hathaway.
- Pay attention to the competition.
When researching companies to purchase stocks, the investor should also pay attention to the completion. They should think about the industry as a whole and how competitive it is and the specific business they are interested in and how it compares to other companies. They should look at the person who is running the business and just research everything thoroughly.
- Invest for the long-term.
Unlike many investors who are looking for the “get-rich-quick” scheme, Buffett advises people to think long-term. He tells them to think about holding on to the stock for years instead of months. As he says, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for ten minutes.”
- Trust yourself.
Don’t get paralyzed by the fears of others. According to Buffett, investors don’t always act with intelligence even though they have more information. Being smart doesn’t necessarily mean they are being rational. It’s best to get away from other people’s attitudes whether they result from fear or greed. This means trusting your own mind over the thoughts and ideas of others.
While these pieces of advice may not make you a millionaire, they come from someone whose advice has worked for him in his own investment company. If you want to see long-term growth and profitability, consider the words of Warren Buffett and how you can implement them into your own investment strategy.