Warren Buffett may own tens of billions of dollars, but he still lives simply, and his strategies for smart investment and accumulation of wealth are not so complicated and can withstand even in these difficult times, writes YahooFinance.
Here are the 10 rules that helped Buffett win and maintain his success:
1. It all starts with good communication
Buffett’s first rule of success has little to do with stock selection. He points out that investors need to be strong in terms of communication: Manage words as your most important tools.
“Without good communication skills, you won’t be able to convince people to follow you, even if you see through mountains they can’t see,” Buffett told Stanford University students.
While this may not seem like wise advice for financial planning, it is good and helpful for anyone who wants to develop leadership skills and the ability to think in a stressful situation.
2. Look ahead, not in the past
In the 1950s, Buffett said that “investors today should not benefit from yesterday’s growth.” This is true today.
According to Buffett, following past trends is less important than identifying new opportunities. According to him, when investors decide whether to bet on a company, they should focus on its future, not on its history.
Buffett believes that people should not stick to the past when it comes to mortgages. According to him, no matter how long they have been repaying their current mortgage loans, they should consider refinancing them to reap the benefits of today’s record low interest rates.
3. When investing, be innovative – do not imitate
Accepting herd thinking is a sure way to get average results, Buffett said.
“To be a successful investor, you have to part with the fear and opinion of the people around you, even though it’s almost impossible,” he said.
According to him, however, at the same time the successful investor should be open to advice.
4. Live modestly
Buffett is known to live far below his means.
He drives an old model car and still lives in the house he bought in Omaha, Nebraska, for $ 31,500 in 1958. The famous investor takes breakfast from McDonald’s almost every day.
5. Always be ready to learn new things
Buffett likes to say that knowledge accumulates just like interest in a bank. He starts each day with a newspaper and reads books on various topics.
Awareness can not only influence investment decisions, but is also able to prepare investors for success in all areas of life.
6. Know when to play them
The idea should not be misunderstood – Buffett sells shares when he should. Despite his overall success, he has very weak stakes. The secret to the success of long-term investing is in predictability when they will be sold.
Buffett learned these lessons as a young man, relying on horse racing. He tries to make up for his losses by increasing his bets, but instead loses more money.
Investors need to be able to predict when a bet on the market is losing so that they can withdraw from it and minimize their losses.
7. Think long term
Buy and hold is a common long-term investment strategy that requires investors to adhere to it even when a stock has had a bad day or month.
Buffett’s approach can be described as “buy and hold and hold”. As he likes to point out to shareholders, “Berkshire’s favorite detention period is forever.”
Buffett does not mind when a stock occasionally falls in price, because it is a good opportunity to buy more securities at a reduced price.
8. Never invest borrowed money
When investing, use your own money. Buffett points out that it is “crazy” to borrow. “It’s crazy to risk what you have and what you need for something you really don’t need,” he said.
If investors borrow to invest, their strategies will be too closely tied to their need to return the money. Some investments require long-term planning and restraint for growth, which is difficult with debt pressing on investors.
9. Dividends are the key to long-term growth
Warren Buffett loves stocks that pay dividends. Berkshire Hathaway, his company, receives hundreds of millions of dollars each year from Coca-Cola in the form of dividends.
Dividends come from reliable companies that constantly meet or exceed their goals. Their shares may not bring much money to shareholders quickly, but their dividends can put the investment on autopilot.
Other companies that pay large dividends are Caterpillar, AT&T, Verizon and investment firm BlackRock Capital, and ironically the list does not include Berkshire Hathaway.
10. Remember that anything is possible
Buffett is known to stick leading newspaper pages on his walls, which include glaring headlines about market crashes.
This reminds him that in investing and in life, one must always be ready, because anything can happen.