10 Financial Lessons From Warren Buffett
10 financial lessons from Warren Buffett would first include a no-brainer: spending wisely. For many this seems to be the most difficult concept to follow. $45,800 was the average income for households in 2010. Of that, 15 per cent or $6,870 was carelessly depleted on frivolous purchases.
Remember that investing rather than frivolously spending earns over 20 per cent in yearly return. Buffet bought a five bedroom apartment 55 years ago that he still modestly occupies today. This demonstrates this idea perfectly.
Who do you think cares about your money the most? The government, maybe? Nope: you! Strive to make your own investment choices rather than being at the mercy of stock brokers. Don’t let yourself be in the 45 per cent of Americans with no financial strategies laid out for themselves.
Financial success requires homework. You should be scanning thousands of stocks before making any investment decisions. Buffett devotes 18 hours daily to his investment capital. It is sad that less than half of Americans are financially literate. Some are not even sure what that means.
In the financial game, one must meet the fear of risk head-on. Buffett swears on stocks above banks, bonds and even gold. 29 per cent of Americans are too afraid of risk to bother investing in stocks. This has not stopped leading stocks from averaging 10 per cent in yearly returns for almost a century.
One must be able to see the long-term in investing. Procrastinating will only make it harder to catch up later with our savings. Remember, investments are like snowballs. Find your “really long hill” like Buffett!
It is essential that your investments be in quality businesses. This is where the homework comes in again. Famously, Buffett is invested in companies like Wells Fargo, IBM and Coca-Cola.
Bargains do come around in stocks for good exceptional companies. Focus on investing your time in research rather than more stocks. Take advantage of crashes and peaks by knowing when to sell and when to keep.
Pay attention to how company management spends its money. Details are key. Buffett at one time invested in a company that was so penny-pinching its owner actually unrolled a roll of toilet paper to realize he had been shorted sheets.
Patience is a virtue. It is crucial that you wait until things are in your favor to interest. The Buffett recommendation is to hold stocks in at least 10 or 15 companies. Do not base investment decisions off the latest headline.
When the market is up, that is the time to get rid of poor stocks. Take advantage of crashes when even great stocks are cheap by investing then. Warren Buffett has much to teach in 10 financial lessons.