The intelligent investor Warren Buffett is one of the most recognized millionaires in the world. According to Forbes magazine, this man is characterized by his vision for business and especially by his good “aim” for investments based on aspects and analysis that, for many, may seem very basic, but over time, Buffett has shown that simplicity can be synonymous with effectiveness.
Buffett spent his teenage years in Washington, D.C., showing an inclination toward business through his newspaper delivery job; the sale of Coca-Cola stamps, golf balls, and magazine subscriptions door to door; and editing a page of horse racing tips.
By age 15, he had $2,000 and bought a farm in Nebraska. This farm paid his tuition at the University of Nebraska, where he graduated with a Bachelor of Science degree.
By 1959, he had opened about seven associations and had more than one million dollars in corporate assets. By 1962, he had become a millionaire, uniting all his associations into one. That same year, he saw an opportunity in a New England textile company called Berkshire Hathaway and is currently one of the owners.
Warren Buffet’s Investing Tips
Following are some tips for investing money that may seem simple but maybe the secret to surpassing our financial goals, all from one of the entrepreneurs and investors who, from a young age, wanted to participate in the world of business.
1) Never lose money
This is the number one rule this tycoon has upheld all his life. The idea is that, once we have the means, we consider the different alternatives for spending or investing. The idea is to define everything that improves the quality of life or generates more profits, that is, to consider financial techniques that can help us make even more money.
2) Break the cycle of living day to day
Do we pay debts just the day they’re due? Big mistake.
When we live in this cycle, it will always be challenging to find the time and resources to really analyze and see where our financial problems come from. The worst part is that if we dedicate ourselves to working on the consequences of the problem, instead of solving the origin, this behavior is the dead-end that prevents prosperity from growing.
What should we avoid?
- Paying for one credit, asking for another.
- Waiting until the collection of debts or make payments after the due date.
- Remaining without any savings at all.
What Warren Buffett recommends is to assume reality with strategies such as: cutting regular expenses, re-evaluating need vs. desire, devoting ourselves to studying and learning financial skills to establish money priorities, and, finally, creating a fixed budget and never exceeding it.
The millionaire asserts that it is astounding how many people live with these habits without stopping their everyday routines. So change must begin in the mentality of individuals who create these psychological limits for spending and establish financial priorities.
3) Price is what you pay; value is what you get
This famous phrase was what Buffett wrote in a letter to the shareholders of Berkshire Hathaway in 2008. It states that we lose money when we pay for something, but the price does not always coincide with the value we attribute to the purchase.
For example, let’s say we made a purchase with a credit card, and it took us three months to pay. However, the product purchased was only used a few times. When seen from this perspective, it doesn’t seem like a very smart purchase.
How can we turn it around?
The business strategy that counteracts the case explained above is based on looking for everything that can grow in value and can be acquired at a low cost, i.e., an investment.
4) Make it simple
Surely you didn’t know that this investor doesn’t own shares in the technology sector. Warren is no charlatan, because he really practices what he says, that if we don’t know something from head to toe, it’s better to stay out of it.
It is necessary to know the limitations we have in order to know what to expect and how far we should go. Although many do not know, the simpler that investments and financial habits are maintained, based on our knowledge of money and the market, then we will perform better.
5) Don’t forget the cash
It seems an archaic concept since, nowadays, with the introduction of crypto-money and the digitization of money, the world seems to be concentrating on eliminating cash, but our friend Buffett points out that a key to maintaining financial reserves is to have cash on hand.
During the Great Recession, cash reserves allowed companies like Berkshire Hathaway to stay in the market during difficult times. Even if we don’t have millions in cash, it’s always good to know that we have some money we can count on.
6) Invest in yourself
One of the tips for improving personal finances is that whenever, when. As much as possible, Buffett insists that one of the best investments is when we seek to do anything to improve our talents and make ourselves “more valuable.” Investments in education and personal growth will never be money wasted.
7) Learn about money
Although for some, it is only pieces of paper, others consider it a science. Studying how money works and how to save and make investments is the key to completely changing our lives, whether in business or in the personal sphere. However, this depends only on us and our interest in improving our financial outlook.
Warren Buffett’s strategy as an investor is to limit exposure and minimize risk, but this can only be achieved through knowledge. If we educate ourselves on financial matters, we will have the basis for making the right decisions and not losing money.
8) Always return something
Strangely enough, Warren Buffett is a faithful believer in karma, which is a spiritual concept based on “receiving what is given,” which means giving something back to humanity when dreams and wealth have been achieved.
Buffett donated $2.8 billion in Berkshire Hathaway stock to five charities. Although we are not multimillionaires, the idea at this point is to enrich both our spiritual lives and the lives of others.
The Discipline of Money from Warren Buffett’s Point of View
Surely they did not know that despite being named the third richest man in the world in 2018 (after Bill Gates and Jeff Bezos), he has a philosophy about the use of money that requires total discipline, some of the most salient aspects are:
1) Think like an entrepreneur: While it may seem incredible that while most adults hate this responsibility, Buffett filed his first tax return when he was 13. Since he was a child looking for opportunities to earn and taking responsibility for each of his businesses, he started from the bottom with a paper route to sell soft drinks and gum door to door.
2) Living below the odds: Buffett stated that when he doesn’t “feel very prosperous,” he prefers his McDonald’s breakfast to be $2.95. Although it seems like a somewhat extreme habit, the moral of this behavior is to spend less than you earn; the average person meets their needs with expenses above their income.
3) Learn as much as you can: No matter how old you are, Buffett spends most of his time reading, learning everything new and unknown about the markets and companies in which he invests. The more you learn, the better decisions can be made.
4) Bid Hunt: Buffett found gold in companies that the market considered devalued, as he bought goods for less than they were worth and held them until market prices rose. It can be considered one of the most intelligent techniques for making money, but it requires a great economic study to achieve success.
5) Thinking (very) long-term: An unquestioned secret of Buffett’s success is that he invests in high-potential stocks and keeps them long-term.
6) Don’t buy until you’re sure: This is one of the most important tips for investing money. Buffett explains that investing is a “zero hit” game. If, at the time of joining or investing, we are not entirely sure or are still full of doubts, it is best to withdraw until all of our questions have been answered.
7) Let’s not be part of the herd: Buffett supports individualistic thinking. If we imitate the techniques and behaviors of others, we will have the same results and the same failures. The philosophy of this businessman lies in the phrase, “fear when others are greedy and be greedy when others fear.” If everyone is investing in popsicles, it may be the perfect opportunity to innovate or invest in a different dessert that can capture the attention of an audience tired of eating popsicles.
8) Safety First: Buffett’s recognized investment rule #1 is “Never lose money,” and #2 is “Never forget rule #1.” We must choose sensible investments and keep them for the long-term.
Although money does not buy happiness, it makes life much simpler. That’s why innovative, persistent, and intelligent people get into the business world and emerge victorious, like Warren Buffett and his companies. It is no secret that one of the pillars of success is knowledge; this gives us power over everything we know, and in the event of a new challenge, we will have the tools to face it.