It is easier to become a successful investor when you have access to timeless advice from successful people. We have all made investment mistakes in the past, and we are still doing so presently. However, today’s blog is a list of advice from Warren Buffett that you need to bear in mind while investing. A slight mistake while investing is enough to suck all of your assets. Before we look into his advice, let’s have a little discussion about the type of business to invest in.
Have you ever heard of MOAT?
MOAT is the comparative advantage that a company has over their competitors. This allows such companies to increase their revenue without incurring additional expenses. This characteristic makes them survive in the economy. When investing, you need to look out for companies or businesses with a broad economic gap over their competitors. Go for the companies that can generate large amounts of cash without incurring debt.
The type of company that you invest in matters a lot. It is best to consider how they can maintain low operating expenses while increasing their revenue. An example of such companies includes Coca-Cola and Facebook. These companies have an established brand identity that strongly distinguishes them from others. As a successful investor, you should consider investing in companies that can produce a particular service or goods at a lower price than its competitors while still generating more revenue. This brings us to one piece of the advice from the most significant investor of all.
Number 1. Look out for business quality before investing
Warren Buffett said, “never compromise when it comes to business quality”. When investing, you have to observe what the product or service of the company is about and how good is what they offer. In addition, you should never hesitate to turn down an investment option from a complicated business. Be comfortable with the quality of the business product before investing. This will help you to remain calm when the market becomes volatile. This is why some investors don’t hold stock for a long time because once there is a fall in the value of their investment, they are confused about what to do or where to go. But when the company has a good comparative advantage over its competitors, you don’t have to fear a temporary fall in investment value.
Number 2. Invest only in what you know
This is a rule that is worth hanging on the wall in the home of every investor. As an investor, either a beginner or not, you should avoid regrettable actions by investing in only what you have adequate knowledge of. Before you dip your toe into the water, know the length of the water and other necessary information. What am I trying to say? Invest only in the industry that you understand. If an investment is too complex to comprehend, let it go or take courses to guide you to its understanding. If you cannot understand a business, then why invest in it? If you are thinking of owning a stock for ten years and more, ensure the company’s business model is understandable.
Number 3. There is no easy way to invest
There is no easy way to succeed in long-term investment. I am here to tell you that you need to make intelligent moves. If you pay attention to things happening globally, you will discover that things are more expensive than before, true or false? Inflation has set in, and life is more costly than last year. Notwithstanding, there is no increase in monthly income. This is one more reason why you need to protect your finances by making the right investment decisions. Everything from housing to groceries is getting more expensive than before. With the rise in inflation, the best security we need is an investment because money sitting around in banks will lose its purchasing power as time goes on.
Number 4. What you pay is the price; what you get is the value by Warren Buffett
Successful investors need to understand the differences between price and value. As an investor, don’t allow the rise and fall in stock prices to determine your emotion. The present changes in the stock price doesn’t mean the company has failed. It is not the right time for you to take action. A company’s cash flow does not depend on the volatility of its stock. This is why it is strongly advised that investment should be made in a company that we have knowledge of.
Number 5. Don’t listen to everybody
If you want to be successful, don’t take advice from everyone you see. You should only take advice from those that you trust. The most significant investor, Warren Buffett, is extra careful when selecting his business allies. This is because he knows how important the role of a business partner is in the success of an investment. Before you blindly trust a person with your finances, carefully evaluate the person’s skills and character. There are many financial advisers, but only a few offer the best advice.
Here’s a BONUS POINT for you. Enjoy this as a reward for sticking with us till the end.
Investigate before investing
It is dangerous to invest in a company that is heavily in debt. This is because they can quickly run into bankruptcy. Just the same way, debt is detrimental to an individual. It also destroys a company. They will prevent your investment from paying off because the company will be busy paying off the interest on borrowed capital. Therefore, invest in companies that are not running on debt to survive.
There are no secrets to successful investment that you cannot have access to. If you want to play the investment game for long, don’t hesitate to invest in more knowledge. Only knowledge will show you what to do in tough times. Your access to knowledge will make you understand the advantage of investing in stable companies. Finally, companies with financial stability are easy to understand and predict in terms of crisis.
If you find this post beneficial, please like and share. It will be our utmost joy to have you comment in the section below. Thank you for reading until the end of this blog. Please don’t forget to signup to our newsletter. You can check out also our previous post on “5 types of investment and how they work“. And remember, always stay very motivated!
Recommended books for further reading:
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits
- The Financial Times Guide to Investing:The Definitive Companion to Investment and the Financial Markets: The Definitive Companion to Investment and the Financial Markets
- The Warren Buffett Way
- How to Make Money in Stocks: A Winning System In Good Times And Bad
- Investing Demystified: How to create the best investment portfolio whatever your risk level
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