This article on 7 investment quotes/rules from the world’s most successful investment guru Warren Buffet, CEO of Berkshire Hathaway, shows you timeless principles of wealth and investing especially if you are an equity investor.
Buffett said the stock market doesn’t have to be a big gamble only if you follow some important investment rules. “The key to building lasting wealth is to take your time and invest with intelligence,” says Phil Town, is an American investor, motivational speaker, and author of two books on financial investment that were New York Times best-sellers.
Never lose money
The drive for investment is to forego current consumption in other to create desired wealth for the future, hence, it is rational if one could ensure never to lose money since of course, your initial objective for investing is to make more money and not to lose what you currently have.
Therefore, you need to be careful when making investment decisions. Warren Buffet has always been driven by this rule of investment – never to lose money – hence, his investment strategy revolves around minimizing risk and maximizing reward.
Price is what you pay for, value is what you get
The Nigerian stock market as a case study as seen a lot of stocks on the market bleed in value – no exception for the bellwethers – owing to the prevalent general negative market sentiment which has caused the All-share index – a measurement for the performance of all stocks – nosedive in market value by -11.95 per cent.
You as an investor may just get it all wrong if you focus only price movements of stock and neglect the underlying value of your investment. “The market can price things wrong,” Phil Town says, hence, don’t focus on short term swings in price.
Hear what warren buffet has to say to this, “beware the investment activities that produces applause, the great moves are usually greeted by yawns.”
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Risk comes from not knowing what you are doing
Buffett says, “Never invest in a business you cannot understand.” It is a normal philosophy of life that you excel at what you are good at and not what you do “guesswork” on. Good understanding of the industry, company, market you are putting your money/fund is key to predicting almost accurately the behaviour of your investments, be it stocks, bond and the likes.
The advice here is obvious but often forgotten, particularly after investors have had some success. The temptation to believe that success in one area you know well allows you to easily analyse another is much greater once you’ve had some good returns, but should be resisted with vigour.
Buffett himself has kept out of the technology sector for the most part, given his lack of knowledge of the sector. This is coming from a man who has successfully beaten the market at different points.
It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price
This quote is very interesting, as frequently, “value investors” will pass on anything that they cannot get for a deeply discounted price. Berkshire Hathaway has taken a different approach and instead focused on investing in the right companies.
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years,” Buffet says, “our favourite holding period is forever.”
Analysis has proven that in the Nigerian stock market, investors get value for their holding 3 to 4 years after the investment is made. Investors with long term view tend to get better returns for their investment against short term investors.
Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future
Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble
Diversification is protection against ignorance. It makes little sense if you know what you are doing. If history was all that is needed to play the game of money, the richest people would be librarians.
These are few amongst the 16-investment rules of Warren Buffet.
