If you are feeling down about your financial situation or your future, Warren Buffett, the second wealthiest man in the United States and the fourth wealthiest in the world is here to give you some lessons. Take a pen and paper, this is fascinating:
Instead of spending money on frivolous purchases, The “Oracle of Omaha” advises on spending wisely. He is the best-case example: Buffett purchased a five-bedroom house in Omaha, Nebraska in 1957, where to this day, still resides. Talk about an unmovable rock.
No one cares about your money as much as you do:
One in three Americans work with a financial planner. About 5% of the population don’t even have goals or strategies they would use. Mr. Buffett, who will turn 87 on August 30th, makes all of his investment decisions all on his own. He does not use commission-based interests or financial advisors or stock brokers.
Scan thousands of stocks:
He spends about 18 hours a day working on investment capital, saying investors should think of themselves as partial owners.
“Never invest in a business you cannot understand.”
Americans are afraid that investing will cause them to lose money, but Buffett says stocks outperform bonds, banks and even gold and are safer. He says that one should overcome the fear of taking risks.
“Risk comes from not knowing what you are doing.”
Focus on the long-term:
Putting off saving or investing means you’ll need to save more in less time for the same outcome.
“The important thing is finding wet snow and a really long hill.”
Invest in quality business:
“An investor needs to buy the stock as if he is buying the whole company down the road.”
Hunt for exceptional bargains for solid companies:
Buffett recommends buying stocks during a crash, when even great companies have extremely low prices. Analyse performance, mission statements, business process, long term goals and more.
Make decisions to invest based on how well money is being used by company management:
Buffett feels penny-pinching is an indicator of a profitable mind set. Actually, he once acquired a company whose owner took the time to discover his toilet paper roll wasn’t really the advertised 500 sheets.
When conditions align, buy an appropriate amount of shares. He recommends holding stocks in 10-15 companies. In bad times, hold on. A quality stock should recover and you won’t have to regret selling prematurely.
“I think the worst mistake you can make in stocks is to buy or sell based on current headlines.”
Wait until everything is in your favour to interest.
Sell losing stocks when market is up; buy within stocks during a crash:
Selling a dud stock at its worst adds to your loss and purchasing a great stock at peak price cuts your gains.
“The beauty of stocks is they do sell at silly prices sometimes….That’s how Charlie [Munger] and I got rich.”