At 90, Warren Buffett’s face is one of the most powerful investors in the world, thanks to ‘Midas Touch’ on Wall Street.
Today, he holds the position of Chief Executive Officer (CEO) at Berkshire Hathaway but did you know Buffett had bought his first stock when he was just 11 years old.
Since then, he has bought shares past the reign of seven Presidents of the United States (US).
According to Forbes, Buffett's fortune is estimated at US $ 82.5 billion, placing him as the third richest man in the world alive behind Amazon founder Jeff Bezos and Microsoft founder Bill Gates.
So how does he do it? In today’s article, the we will share 5 Warren Buffett way investing tips.
1. Investment Is A Long Term Game
According to Buffett, investors cannot buy and sell stocks at will. But what you can do is define a solid number of businesses and if you buy a portion of the company’s stake over time, you certainly won’t lose out.
He explained that investing is a long -term game.
“I know what the market situation is for a long time. It will increase. But in terms of what happens in a day or a week or a month or even a year, I don’t feel like I know about it and I don’t feel it matters.
“I would say in 10 or 20 or 30 years, I think the stock will be higher than it is now,” Buffett told Becky Quick in ‘Squawk Box’ in February 2016.
Buffett also equated buying stocks with owning more physical assets.
“If you own stock like you own a farm or an apartment, you’re not going to get quotes every day or every week,” Buffett told Squawk Box. The same is true if you buy company stock.
2. Investment Diversification
To protect your money, buy shares in various types of companies and expand your purchases over time.
“The great thing about stocks is actually buying them consistently over time,” Buffett explained to Squawk Box in February 2017.
Buffett added, you need to split the risk by investing in a select few companies to diversify the portfolio as well as consistently buy stakes over time.
3. Stocks Are Better Than Bonds
“If you save money, you can buy bonds, you can buy farms, you can buy apartments/houses - or you can buy parts of American businesses.
“And if you buy a 10 -year bond now, you’re paying more than 40 times the income for something whose income can’t grow. You compare it to buying equity, good business, I don’t think there’s any comparison, ”Buffett said.
The 10 -year government bond opened at an interest rate of 2.32% and closed at 2.49% on February 27, 2017, when Buffett commented above. As of December 17, 2018, the 10 -year government bond had an interest rate of 2.87%.
Meanwhile, the benchmark S&P 500 index rotally recorded an annualized return of 10.2% over the last 30 years, according to FactSet.
Obviously, as Buffett himself said, anything can happen in the market. If bond interest rates outweigh stock market returns, then his advice no longer applies.
“But I would say this: If a 10 -year bond stays at 2.30% and lasts for 10 years, you will regret not buying the stock now,” Buffett explained.
Buffett added that he is confident that stocks will outperform bond returns because stocks have been much more attractive than bonds for a long time.
4. You Can't Choose The Best Time
According to Buffett, it becomes a big mistake if you postpone your move by waiting to invest at the time that feels best because you can’t predict the market situation.
5. No Room To Be Emotional
“Some people should not buy stocks because they are too frustrated with market fluctuations. If you do the wrong thing because your stock is declining, you should not get involved in investing.
Clearly Buffett, some people are actually not emotionally or psychologically fit to buy stocks and investing is not for them.
