When studying individuals who have been very successful in with investing, I believe in my opinion Warren Buffett is the place to start. There are some that may argue with that, however he is the wealthiest investor in our world today. Here are some helpful tips that may help you to focus better or enhance your investors knowledge.
Buffett bulleted five fundamentals of investing, which we paraphrase:
- “You don’t need to be an expert in order to achieve satisfactory investment returns.” But Buffett also warns that the investor should recognize her limitations and “keep things simple.
- “Focus on the future productivity of the asset you are considering.” Buffett notes that no one can perfectly forecast the future profitability of an investment. “[O]mniscience isn’t necessary; you only need to understand the actions you undertake.”
- “If you instead focus on the prospective price change of a contemplated purchase, you are speculating.” Buffett has nothing against price speculation. But he emphasizes that it’s important to be able to know the difference between investing for the productivity of the asset versus investing on hopes that the price of the asset changes.
- “With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.” In other words, focus on the long-run.
- Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important.” So mute CNBC, Bloomberg TV, and Fox Business. Unless Warren Buffett comes on lol
BONUS – MORE HELPFUL TIPS FROM THE BUFFETT MAN…
1. Don’t let world events (like what’s happening in Ukraine) affect your investing decisions. – Buffett said even if he knew a big war was unavoidable, “I will still be buying stock. You’re going to invest your money in something over time. The one thing you can be sure of is if we went into some very major war, the value of money would go down. … That’s happened in virtually every war that I’m aware of. … The last thing you want to do is hold money during a war. You might want to own a farm, you might want to own an apartment house, you might want to own securities. During World War II the stock market advanced. The stock market is going to advance over time.”
3. Don’t think you have to be an expert to profit from stocks – “The stock market just offers you so many opportunities, thousands and thousands of different businesses. You don’t have to be an expert on every one of them. You don’t need to be an expert on 10 percent of them even. You just have to have some conviction that either a given company, or a group of companies … are likely to make more money five or 10 or 20 years from now than they’re earning now. And that is not a difficult decision to come to. “And if you have no expertise at all, Buffett recommends a low-cost index fund that tracks the S&P 500. “Keeping costs to a minimum is enormously important in investing. … If you’re in effect paying out 1 or 2 percent annually of your portfolio, that’s a big, big tax that you don’t have to pay.”
4. Don’t go for the quick profit – Asked if “activist investors” are really acting in the best interest of targeted companies and their shareholders, Buffett replied, “Generally speaking, they are interested in making a quick profit and there’s no law against making quick profits. But our whole attitude in our own business and what we like to see with the businesses we own stock in is we want to run them for the people who are going to stay in rather than the people who are going to get out. At any given time, you can make more money, usually, selling the company. … The answer isn’t to sell the company. The answer is to keep running the company well. … I could do certain things to jiggle up the price of Berkshire in the short run. It would not be good for the company over five or 10 years.”