Warren Buffett is a well known and trusted name when it comes to investing. His personal portfolio is a clear indication of his extensive knowledge, so why not learn a little bit about what has made him so successful?
Here are a few quotes from him and his successful partners that explain their most basic philosophies.
1. “Never invest in a business you cannot understand.”
When you invest in a business you are putting your trust in them and their future success. Can you really do that when you do not understand how they profit? Being able to understand a business inside and out is what will give you the knowledge to determine if they are a good investment.
2. “It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Price is one thing, value is another. It is great if you got a company at a wonderful price, but will it really bring value to your portfolio long term?
3. “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.”
Investing is certainty and making a profit. Can you really make a profit in ten minutes? There should not be a lot of risks involved, which is why you should be comfortable investing long term.
4. “The market is depressive.”
The market is a giant emotional being. It reacts to scares and trends quickly, not logic. Just because the market moves one way, does not mean it is the right direction to move in. Be logical.
5. “Always stay rational.”
Have reasonable expectations and like point 4, be consistent in your thinking. Do not be expecting a get rich quick investment. Investing is a marathon, not a sprint.
6. “It’s not supposed to be easy. Anyone who finds it easy is stupid.”
If it were easy, everyone would be doing it and would be successful. You do not need to be Mark Zuckerberg smart in order to make smart investments. It is very work intensive, so you need to be educated on the right decisions to make.
7. “Price is what you pay. Value is what you get.”
Like point 2, you should be more focused on the value rather than the price. Remember, you are going in with the expectation that this business is going to expand greatly one day.
8. “Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”
When you make an investment you are looking for a business that is going to expand to great numbers one day. Few people know about these businesses, so you probably won’t be getting a lot of applause when you make an investment.
9. “We eat our own cooking.”
If you are considering a business to invest in, consider the management and their investors. Is management driving fancy cars and eating well? Then the shareholders should be. If they are not, then this is a red flag and foretelling your possible future.
10. “We use debt sparingly and, when we do borrow, we attempt to structure our loans on a long-term fixed-rate basis.”
If a company relies on debt to continue operating this is a potential red flag. It says a lot about their business model and their inability to make sufficient revenue to run their business, let alone pay they shareholders.
Warren Buffet is filled with fantastic wisdom on how to best invest your finances. Start with some of his practical wisdom to begin your portfolio.