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There are many forms of investing. Most people, when they think of investing, I’m sure many think of the “Wolf of Wallstreet”, or something similar; high aggression, testosterone-driven, swearing, sweaty, money-fueled madness.
But this is embellished reality – a story made all the more obscene to make a good film. Real investing is not like this. In fact, the kind of investing that is safe, secure and sustainable is decidedly unexciting. It involves due-dilligence, honest, emotionless appraisal, and playing the long-game. This is everything that the famous Warren Buffett stands for, and he is an excellent investing role-model for the rest of us. In fact, he also disliked the testosterone-fueled craziness that was going on in wall-street, and chose not to be part of it.
If you don’t know who this genius man is, he is the CEO of a major American share-holding company called Berkshire-Hathaway, and is known as the “Oracle of Omaha”. He is one of the richest men in America, and is well on his way to his 90th birthday. This is what he partially blames his amazing success on – his good genes and time spent actually investing.
“My wealth has come from a combination of living in America, some lucky genes, and compound interest.” – Warren Buffett
He is also an absolute investing genius with a very high IQ, and has a mind that thinks like no other, but this doesn’t mean the rest of us are doomed! This post discusses 5 investing principles that Warren Buffett swears by, and which we can apply to our own personal finance and investing to be more successful and sustainable in the future.
If you want to be successful in your financial life, then it makes sense that you should take your lead from the most successful investors of all time. One name that immediately springs to mind is Warren Buffett. No matter what your views on the man are, there’s no denying that when it comes to money he knows exactly what he is doing.
So, if you’re interested in learning as many lessons from investing experts as possible, you really could do worse than Mr. Buffett. With that in mind, here are some of the most important financial tips that the great investor has imparted through his words and actions over the years:
Although Warren Buffett is one seriously rich man, he still lives in the same five-bedroom apartment that he has lived in for over half a century. Most people with an estimated net worth of $84.3 billion would be living much less frugally than that, but what Mr. Buffett knows is that the less money you spend, the more you can save and the more you have to invest and increase your wealth. As long as you have the basics you need to live a good life; there is no need to be frivolous with your cash and do more to help others.
“If you buy things you do not need, soon you will have to sell things you need.” – Warren Buffett
You Will Always Care More About Your Money Than Anyone Else
Warren Buffett is famed for making all his investments by himself for his own interests. By cutting out the financial advisers and stock brokers, not only does he not have to give them a cut of his fortune, but he can be sure that he isn’t being given bad advice for ulterior motives. Of course, he knows exactly what he’s doing, which means that if you want to be like him, you really need to know your stuff. Take the time to learn the stock market inside out, and you can successfully look after your own cash.
“There is nothing wrong with a ‘know nothing’ investor who realises it. The problem is when you are a ‘know nothing’ investor but you think you know something.” – Warren Buffett
Investing Success Requires an Education First
Warren Buffett spends on average 18 hours a day grinding away with investment capital. You probably don’t have the time or inclination to do similar, but you should take away the fact that being successful in the world of investment requires education and dedication. You can’t simply spend a few hours choosing a stock and then forget about it. Warren Buffett applies a “buy and hold” principle which involves needing to know a lot about what you’re buying first. He DOES NOT advocate trading.
Trading is when stocks are bought and sold to try and make big profits, but isn’t for the faint-hearted. If you’re going to go down this route, you NEED to know what you are doing, so take the time to learn from good people and don’t be tempted by “get rich quick” schemes. There is NOT one stock that will make you millions overnight.
There isn’t anything necessarily wrong with trading, but when the “Oracle of Omaha” says that when he dies he’ll ask his family to put most of his assets into Index Trackers in order to protect them, you know that there aren’t many (if any) people who can do what he does to the same level of intensity, and he knows it.
“Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.” – Warren Buffett
Risk Comes with Reward
Although it is always worth saying that there is no such thing as a guaranteed profit in the world of stock investments – you could in theory lose it all – it is also worth mentioning what Warren Buffett knows namely that stocks outperform banks, bonds and even commodities like gold, so if you are willing to take the risk, the chances of reward are much higher than they are via other means!
Not all “risks” are the same though, and index trackers are a relatively-safer way to invest your money in the long term than it would be to invest in just one or two companies. Warren Buffett certainly wouldn’t risk his money on “fads and hype”.
“When forced to choose, I will not trade even a night’s sleep for the chance of extra profits.” – Warren Buffett
Start Small End Big
Mr. Buffett has always said that the sooner you start investing, the better off you’ll be, because you can take advantage of COMPOUNDING. Leave it too late, and you’ll need to invest more later for fewer rewards. So, if you aren’t investing yet, start now.
“Someone’s sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett
You might not end up a multi-billionaire, but if you take Mr. Buffett’s advice, there is every chance you could invest your way to greater financial freedom!
I hope you enjoyed that. He is a very interesting man, so if you ever get a chance to read more about him, you’ll learn a lot! If you are interested in learning more about getting started with investing, then why not drop me an email to be added to my mailing list. You’ll get the first chance before anyone else to try out my investing course coming in the next few weeks.
My email is firstname.lastname@example.org
I also have a fabulous private Facebook group of like-minded women (and a few men!) who all want to learn about personal finance and investing. We support each other and celebrate our wins. Why not come and be part of that!
Until Next Time,