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Simple Investing Advice From Warren Buffett
By JLP | March 4, 2010
One thing I have always liked about Warren Buffett is that his advice is simple and easy to understand. Granted, one doesn’t become as wealthy as he is without having some serious smarts. But, when it comes to investing, simple advice withstands the test of time.
That said, I thought I’d share with you the major points from this article I read this morning. Here are six tips from Warren Buffett:
1. Stay liquid. How many companies went out of business because they didn’t have enough liquidity and were instead depending on the banks for their liquidity?
2. Buy when everyone else is selling. It’s takes guts to buy when everyone else is selling and when you look at your 401(k) and watch it go down in value on a consistent basis. BUT…that’s exactly what you have to do if you want to be a successful investor. Most readers of this blog already understand this principle. Rather than being upset that the market is going down, we should be excited that we are buying assets (stocks) on sale.
3. Don’t buy when everyone else is buying. This is easier said than done. However, there are times when it’s fairly easy to spot bubbles in various asset classes. One where I see potential trouble is with gold. Why? Because everytime I turn on the TV, there are commercials touting the virtues of gold. The first thing I think when I see a trend like this is, “Uh-oh.”
4. Value, value, value. Buffett doesn’t like growth stocks. I’m not a fan of them either. The price you get in at is what’s important. For a great explanation on growth versus value, check out Jeremy Seigel’s The Future for Investors: Why the Tried and the True Triumph Over the Bold and the New
5. Understand what you own. I think this goes with anything. Stocks, bonds, mutual funds, insurance products (how many people TRULY UNDERSTAND insurance products? Not many! Heck, I’m one of them.).
6. Defense beats offense. On this point, Buffett explains that over the last decade or so, there have been times when the S&P 500 outperformed the return for Berkshire because Berkshire refused to jump into “hot” industries. However, when you look at the long-term results, Berkshire’s the clear winner.
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Topics: Investing | 6 Comments »
March 4th, 2010 at 3:38 pm
These six tips are not that hard to list. It is yet another story to bring them to life. When we make our own investment decisions we are a long way away from Warren Buffett’s. This applies to almost any one of these 6 items. Just think about how many people got suckered into buying hot internet stocks 10 years ago or red hot real estate until only a few years ago.
For me the biggest challenge is #4: “value”. Buffett has a much deeper understanding of what constitutes real value than I will ever have. Besides, if we were all like Buffett, there would be another kind of guy who would outdo all of us Buffetts.
March 4th, 2010 at 4:05 pm
Thanks, JLP.
March 5th, 2010 at 11:17 pm
September 2008:
Buffett says “We MUST pass the bailout, or face an economic Peal Harbor”:
http://www.youtube.com/watch?v=qCMn7g4DJHY
January 2010:
Buffett says “Most of the banks didn’t need to be saved”
I trust Buffett about as much as I trust a politician. The US taxpayers have lost _billions_ to specifically bailout Warren Buffett.
March 5th, 2010 at 11:18 pm
Link to Buffett’s January 2010 comment:
http://www.businessweek.com/news/2010-01-20/buffett-opposes-obama-bank-fee-likens-plan-to-taxing-congress.html
March 8th, 2010 at 3:12 pm
Unlike BG, I’m a big Warren Buffett fan. In fact I’m re-reading his biography The Snowball!
Your tips are a good summary. There’s so much to him though, you could keep folding out his past and his strategy like an origami.
March 9th, 2010 at 9:01 am
I think Buffet made more money actually from insurance than stock market.