With a net worth of over $70 billion, it’s safe to say Warren Buffet knows a thing or two about investing. So when he offers to share a few tips about investing, the best thing to do is listen and take notes. If you are an average worker looking to get the most out of your investments, here are a few pieces of advice from the Oracle of Omaha.
#1 – Invest In Yourself
Warren Buffet believes the best investment you can make is always in yourself. Invest in your own abilities. Anything you can do to become better is a smart thing to do.
#2 – Never Buy Into A Business You Don’t Understand
As an individual investor you should never invest in a business you don’t understand. Instead you should focus on the things you do understand. Warren Buffet was quoted as saying, “There are all kinds of businesses that [longtime partner and vice chairman of Berkshire Hathaway Charlie Munger] and I don’t understand, but that doesn’t cause us to stay up at night. It just means we go on to the next one, and that’s what the individual investor should do.”
In other words, don’t waste time and money trying to figure out businesses you don’t understand.
#3 – Participate In Total Diversification
Unless you are a professional investor and have 100% confidence in the investments you make, your focus should be total diversification. Buffet believes most individual investors should invest in a broad-based index fund that tracks the S&P 500. Keep in mind the economy will always bounce back over time.
You should therefore take your time so you can avoid buying at the wrong time and at the wrong price.
#4 – Don’t Forget About Competition
Anytime you invest in a business by buying stock, what you are essentially doing is buying a piece of that business. You should therefore focus on competition as well. What is the competitive position of the company you want to invest in? You need to know this information before you buy any stock in any business.
#5 – Trust Yourself
Warren Buffet advices all individual investors to divorce themselves from the crowd. It’s very difficult to trust yourself when you are always around a bunch of greedy and fearful people. While he acknowledges trusting yourself is a very hard thing to do, he always believes it’s vital if you want to be a successful investor.
Copyright 2016 Economic News Articles