One of the best investors in all of human history is the Oracle of Omaha. Warren Buffett has amassed a fortune that’s reached tens of billions of dollars, all while giving billions away. In fact, his net worth is usually found somewhere in the top five in all the world. Buffett has argued that there are three qualities that all great investors should strive to have to maximize their financial success.
Know What You Know:
Buffett argues that everyone knows something, but there are many areas that everyone will have little knowledge of. The best way to be successful as an investor is to stick with what you actually know. It’s less likely that you’ll make mistakes by following this advice.
Buffett’s number one rule of investing is to never lose money. By getting involved in areas that you have little understanding of, you make it more likely that you’ll break this primary rule of investing. By focusing only on investments you understand, you’ll make it more likely that you’ve have success. For those who have little understanding of the financial markets at all, Buffett recommends simple, low-cost index funds that follow large-cap stocks that are based in the US.
Increase Your Knowledge:
While you should focus on what you know, there’s nothing stopping you from learning more about what you have little knowledge of. Buffett is known to be a voracious reader, and there are many good books available that deal with financial and investing principles. By reading some of these books, you’ll likely increase the scope of your area of competence and make it much more likely that you’ll achieve a higher level of success as an investor. One of Buffett’s favorite books of all time is his mentor, Benjamin Graham’s, book The Intelligent Investor.
Don’t Trust The Wisdom Of The Crowd:
One of Buffett’s most famous quotes is that you should be fearful when others are greedy and greedy when others are fearful. This means that when the market is running sky-high and more and more people are starting to invest, it’s probably a good time to be cautious with your money. The real money is made by going against the grain and putting money into the market when prices are depressed. Most people like to make purchases when items are on sale, yet they avoid stocks when they are relatively cheap. It’s easier to make money when buying low and selling high than the inverse, yet most people make their investments with the opposite rationale. Don’t follow the crowd, and you’ll likely wind up better off.
When getting ready to invest, you could do much worse than listening to the sage advice of Warren Buffett. From recommendations to learn more and to avoid following the herd, Buffett’s recommendations will help ordinary investors to achieve better results over the long run. Just remember that it’s better start earlier, rather than later so that compounding can have more time to work its magic.
Davenport Laroche is a leading shipping container investment agency based out of Hong Kong.