Warren Buffett is perhaps one of the most successful investors in the world. He is also one of the richest people in the world. Here are some lessons you can learn from the “Oracle of Omaha”:
1. Live below your means
Warren Buffett has a net worth of 77 billion. But he still lives in the same house he bought in 1958 for only $31,500. Compared to his income and net worth, Warren Buffett lives frugally. The rest of his money is protection in case of emergencies. Because he lives frugally, he can also invest more money, which will reap more rewards. Not only will his wealth grow faster, but it is unlikely he will declare bankruptcy. Consider this quote by him:“I’m not interested in cars and my goal is not to make people envious. Don’t confuse the cost of living with the standard of living.”
2. Buy And Hold
Warren Buffet is a firm believer in long-term value investing and constantly reiterates this. The secret to a better return is to be patient. Quality investments earn returns and grow exponentially over time. Basically, his mantra is “Don’t trade; invest” Frequent trading will erode a significant chunk of your returns in the form of commissions and taxes.
3. Research Before You Invest
Always research before you invest. Buffett researches each of his companies thoroughly and makes sure he can understand them before he invests. After he has deemed a stock to be strong, he invests generously. He also likes companies that can be easily run. After all, companies that are “so simple even a fool can run them” are relatively safe investments – even when fools ARE running them. Warren Buffett does not keep his research method for investing a secret. He publicly speaks about his strategy. You can find many videos of him on youtube speaking there’s a lot you can learn from him.
4. Resist Trends
There are always trendy stocks to buy like Facebook, Apple, Snapchat, or Twitter. But Warren Buffett stays away from these (with the exception of Apple now), instead of investing in stocks that have a proven track record. After all, there is no telling where the newer trends will go and how long the trendy investments will turn a profit.
5. Borrow as Little as Possible
Buffett has never been a huge fan of borrowing and has stuck to this principle by never borrowing a significant amount of money. He has talked about receiving letters from company owners who found themselves overwhelmed by the debt they’re in although their borrowing seemed once manageable.
His advice is simple:
“Negotiate with creditors to pay what you can. Then, when you’re debt-free, work on saving some money that you can use to invest.”