It’s arguably known throughout the world of investment that there is one greatest of all time investors. This man, as you might have guessed, is a certain Warren Buffet. Maybe he was the one Benjamin Graham was referring to as the intelligent investor in his book. We’ve been following and learning from him over time, and the reason is simple; his investment approach and explanation are at a very simplified level that can easily be understood. In today’s video, we want to take you on a ride into some of the numerous Buffet’s investment principles. We believe these principles are essential to the success of every investor in making the right investment decision. This is another sweet spot to learn, so discard every distraction and let’s dive into six principles for picking the right stock and investing intelligently.
Invest To Gain and Not To Lose
In Buffet’s words, “The first rule of investment is; don’t lose. And the second rule is; don’t forget the first rule. If you buy a group of things for far below what they’re worth, you basically don’t lose money”. Buffet believed that the price point of a stock is as imperative as any other metric for selecting the right share for investment. When the price is more than the value, there’s more chance for loss and vice versa. At all times, it’s better to purchase undervalued stocks and not overvalued ones.
Emotions Are Not Allowed In The Game
Another essential rule from Buffet is the temperament quality. He mentioned in an interview that the game of investment is less dependent on a high level of intellect to be a wise investor. What’s vital is your ability to control your emotions. There is always a lot of noise, ups and down in the stock market, so it’s very easy to get off track. So, you need a temperament that can stay neutral regardless of where the crowd is moving. Rather, your decision should be based on facts and data.
Look At The Big Picture (The Company And Not The Stock Price)
Look At The Big Picture (The Company And Not The Stock Price)Everything in life has a basis of origin. Buildings have a foundation. Computers are built on programs, and so on. The same goes for investment. People tend to forget that the stock market didn’t exist anywhere. Stocks are indications that you own a portion of a company. The performance of this company will determine what you see in the stock market. So, instead of focusing on the stocks, you should study the company you’re buying. That will give you a better ground to analyse and evaluate if it is worth buying for your preferred purposes. In fact, Buffet advised that you look at the company first before knowing the price so you can be realistic when doing your valuation.
Stay Away From Intimidation And Distraction
What you need is the data and information needed for analysis and evaluation, not the hype. Buffet chose to stay away from New York because he didn’t want the evaluation and noise on Wall Street. He believed it might make you lose focus and clutter your mind with too many options. So, it’s best to stay free from the noise.
Buy Stocks You Are Competent To Value
It’s often said that one of the best ways to lose your money is to invest it in things you don’t understand. Buffet himself said there are stocks he’s not competent enough to value. But for the few that he can evaluate, he would focus on them and find the one with the best price relative to the company’s value. According to Buffet, he can stay idle for two years without taking a step. He’s always waiting for the card that fits his understanding of what makes a juicy investment. He doesn’t have to be everywhere or know what’s happening to the stock every day. All he needs is a good deal based on price and value and his understanding of the business. That’s how you should also be as an intelligent investor.
Make Simple Investments
Make Simple InvestmentsThis is the part that we love most with Buffet. He deals with investment in a simple way. To him, you don’t need complex calculations to be an investor. Too many variables and calculations are for short-term purposes, which doesn’t count. As a long-term investor, you don’t need more than facts about the company and a reasonable price point.
That’s Buffet for you. He is a long-minded investor that considers facts and not noise when investing. His approach is out of complications and complex calculations that we see from time to time. It takes an understanding of the company and potential future performance relative to price and value to make a buffet investment. And that’s what you should also be doing. Focus on your goal, work on your emotion, evaluate the company and make your investment strategy to be as simple as possible. That way, it’s only a matter of time to make a fortune.
If you enjoy this blog, please hit the like button and share it with investors that you care about. Let them learn from the best so they can also make good investment decisions and sweep more wealth into their portfolio. What do you think about these rules, and which one would you like to add to them? Let us know your answer in the comment section.
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Recommended books for further reading:
- How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology
- Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week
- The Barefoot Investor: The Only Money Guide You’ll Ever Need
- The Five Rules Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market
- Investing QuickStart Guide: The Simplified Beginner’s Guide to Successfully Navigating the Stock Market, Growing Your Wealth & Creating a Secure Financial Future
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Important principles to follow