If you are feeling in the dark about your financial situation or future, who better to listen to than the third richest man in the world? So we are here with 10 financial lessons that we can learn from Investment guru Warren Buffett.
Warren Buffet’s Top 10 Secrets of Getting Rich
Spend wisely
When your income is limited than your needs also become limited & you will definitely think about your spending and see to it that you spend your money wisely.
But when your income is unlimited than your needs also become unlimited & you will definitely spend your money in a haphazard manner.
Amazingly although Warren Buffett is the richest man in the world he spends money wisely as he believes in simple living high thinking.
“He still lives in the same small house in mid-town Omaha that he bought after he got married 55 years ago. He drives his own car everywhere and does not have a driver or any personal security people around him.”
So spend money wisely and always think about how you can accomplish things economically. As your earnings may not be in your hands spending money is in your hands only.
No one cares about your money as much as you do
Many people today relay on financial advisors or so-called trading experts. As nothing is available for free in this world this financial expert always sees their interest while giving you advice to you.
Buffett makes all his investment decisions on his own for his own interest & not the commission-based interest of financial advisors or stock brokers.
Do your homework before investing
This is the most important point in managing your finances. Investment without planning or understanding will always lead to disaster.
Warren Buffett says: “Never invest in a business you cannot understand”
Buffett spends 18 hours a day working on investment capital, saying investors should think of themselves as partial owners. Many of us hardly spend 1 hour per day on our financial matters.
Overcome your fear of risk
Fear of risk or fear of losing capital always creates negative emotions among us and we end up making wrong financial decisions. One has to acquire knowledge to overcome the fear of risk.
Warren Buffett says: “Risk comes from not knowing what you are doing”.
So if you are not aware of what you are doing where you are investing than your investment is always at stake.
Focus on the long-term
Start saving/investing at an early age & continuing your investment will always help in the long run. Buffett believes in the same theory that putting off saving/investing means you will need to save more in less time for the same outcome.
Buffett equates life to snow balls; think of investment in the same way: “The important thing is finding wet snow and really long hill.
Invest in Quality Business
If you are purchasing stock of any company you should always go for quality business stocks. That is the reason you should do enough homework before investing in stock.
Buffett says “An investor needs to buy the stock as if he is buying the whole company down the road”.
Hunt for Exceptional bargains for solid companies
One has to hunt for solid companies in terms of fundamentals, performance, business process, assets, long terms goals, and more.
One should invest in these solid companies at a reasonable price. Buffett recommends purchasing stock during a crash, when even great company stocks are available at low prices.
Make decision to invest based on how well money is being used and managed by the company
The investment decision of most investors is inspired by emotion today. You should always make investment decisions based on facts about how your money is actually will be used by the company.
A company managed by people having profitable mindsets and good business insight always helps.
Be patient – Wait until everything is in your favor or interest
Many people become inpatient and sell stock on market crash. Buffett recommends to be patient & to wait until everything is in your favor.
When conditions like a market crash arise you should opt of a buy decision and not sell, in bad times hold on, quality stocks always recover and you won’t have to regret selling prematurely.
Warren Buffett says “I think the worst mistake you can make in stocks is to buy or sell based on current headlines”.
Sell losing stocks when market is up; Buy winning stocks during a crash
Buy low sell high is always expected behavior of investors. But most of the investors act in a reverse manner due to emotions. Selling flop stock at its worst always adds loss to your portfolio, similarly purchasing great stock at peak price adversely impacts your profit.
Warren Buffett says “The beauty of stocks is they do sell at silly prices sometimes.. That’s how Charlie (Munger) and I got rich”.
Hope these secrets of getting rich by Warren Buffett will help you in managing your finances in a better manner.
