Warren Buffett is one of the key figures that all aspiring investors get to know, and his investment firm Berkshire Hathaway’s buying and selling strategies are studied by millions of investors around the world. Buffett lists 10 fundamental rules that will help you achieve success.
Warren Buffett is # 6 on the Forbes 2021 list, one of the most famous billionaires in the world and still an example for investors around the world.
Warren Buffett’s fortune is close to $ 100 billion, at the beginning of 2021 Forbes magazine estimated it at $ 96 billion.
At 90, Buffett is still chairman of his investment firm Berkshire Hathaway (BRKB, BRK-A, BRK-B) and in a February letter to shareholders, he said he had no plans to retire.
The secret of the “Oracle of Omaha”, as Buffett is also called, is not in complex investment strategies, but in discipline and patience, which many people either do not have, or they do not want to develop these qualities.
In his interviews, Buffett provides advice to both newbies and professional investors that can be summarized in the “Ten Rules of Making Money from Warren Buffett”.
1. Good communication skills
Buffett’s success is based on strong communication and persuasion skills.
“Without good communication skills, you can’t convince people to follow you, even if you see the mountain and they can’t,” Buffett once told a Stanford MBA student.
It is the most important tool, the development of which will improve leadership skills and the ability to think in stressful situations.
2. Look forward, not backward
In the 1950s, Buffett declared that “the investor today is not making a profit from yesterday’s growth.”
This principle remains true today. Following past trends is far less important than finding new opportunities, Buffett said.
When deciding to invest in a company, it is worth assessing the real growth potential of its market in the future, despite its historical merits. An understanding of current trends is important here in order to anticipate what people will need in the future.
3. The secret is to separate from the crowd.
Doing the same thing for most other investors is a surefire way to get average results.
Warren Buffett says, “You need to separate your mind from the crowd.”
It is difficult to innovate, but you need to try to “break out of the crowd” by developing your own investment strategy based on your knowledge and experience.
“To be a successful investor, you have to separate yourself from the fears and greed of the people around you, although this is almost impossible,” says Buffett.
Today the Internet offers a lot of advice, but these should be divided into those that are “crowd-sourced” and really worthwhile.
4. Cost control
Buffett is known to live well below his means, drives a rather old modest car, and still lives in the house he bought in Omaha, Nebraska in 1958 for $ 31,500 and takes breakfast at McDonald’s almost every day.
This does not mean that the investor must limit himself in everything, but beginners should remember about the rules for getting out of the rat race. Who does not understand what it is about – read the books of the investor Robert Kiyosaki.
5. Strive for new knowledge
Buffett starts each day with a newspaper and reads books on different topics every day.
The 21st century is the age of information and technology, if you do not constantly strive to learn new methods and strategies, you risk that your methods will become outdated and will not bring the desired profit.
Be like Buffett and you never get too old to learn new things.
6. Know When To Sell
Warren Buffett is known as a long-term investor, but this does not mean that he never sells previously purchased shares. When the pandemic began in 2020, Berkshire Hathaway sold its entire stake in the US aviation industry.
To be successful in long-term investing, you need to know when to sell. Buffett learned these lessons as a young man, betting on horse racing: when he tried to compensate for losses by increasing his bets, he lost even more money.
Determine when the stock actually loses to sell and minimize your losses.
7. “Love is serious and for a long time”
Warren Buffett’s strategy isn’t too difficult – make a good choice and stick with it, but it has a twist.
The traditional long-term investment strategy sounds like “buy and hold,” which means sticking to your chosen stock even when it’s having a bad day or month. But Buffett’s approach can be called “buy, hold and hold”.
He loves to tell Berkshire Hathaway shareholders, “Our favorite tenure is forever.”
When stocks plummet from time to time, Buffett takes advantage of this as a good opportunity to buy more stock at a discount.
8. Never invest borrowed money
The first “commandment” of the investor is to invest only the money that you are not afraid to lose and use only your own.
Warren Buffett said: “It’s crazy to risk what you have and what you really need.”
If you are borrowing to invest, your strategies will be too closely tied to your need to get your money back. Some investments require long-term planning and growth expectations, which is difficult if you have debt hanging over your head.
9. Dividends are the key to long-term growth
Dividend stocks have many advantages – they tend to be profitable in the form of dividends, even though stocks are weakly rallying and stock market downturns are short-lived. This money is often used for reinvestment.
Dividend stocks are some of Buffett’s favorites, his company Berkshire Hathaway receiving hundreds of millions of dollars annually from Coca-Cola (KO) and Apple (AAPL) in dividends.
Since owning and increasing its stake in Apple since 2016, Berkshire has received more than $ 770 million in dividend income.
Other high-dividend companies include Caterpillar (CAT), AT&T (T), Verizon (VZ) and investment firm BlackRock Capital. Read also the Marketinfo.pro article “Top 5 Stocks in 2021 to Invest for the Long Term”.
10. Be prepared for a crisis
Buffett’s walls have been covered in newspapers with screaming stock market crash headlines, reminding him to be prepared for the worst in investing and in life.
Keeping this in mind will help you tread carefully and make informed decisions about your investments. You will avoid taking on debt that you cannot handle, you will not lead an unacceptably wasteful lifestyle and you will be able to withstand market fluctuations – like Warren Buffett.
Marketinfo.pro periodically publishes a portfolio of Berkshire Hathaway stocks, so you can register for free newsletter articles on topics of interest to receive notifications. Read more about the latest changes in Warren Buffett’s Early 2021 Berkshire Hathaway Investment Portfolio.