Level Up Your Investment Strategy With These Valuable Tips From a Legendary Investor
Investing in appreciating assets like stocks and bonds is one of the many ways people can grow their money. However, not everybody has the knack for playing the volatile market to come out a winner.
Billionaire and investing whiz Warren Buffett is one of the skilled ones who do. For decades now, the Berkshire Hathaway CEO has helped make a lot of people wealthy thanks to his understanding of the stock market. And now, he shares some of the best tried and tested investment tips every investor should really know.
Sticking to Selected Choices
First, the 89-year-old stock market veteran tells everyone needs: the skill to evaluate selected companies. The emphasis is placed on ‘selected’ as an individual need not be an expert on every company but only those that are in their ‘circle of competence’.
This concept pertains to all the valuable information that a person has acquired throughout their life. It can include anything from some simple knowledge of the economics of certain businesses as well as an understanding of accounting. Equipped with these, one can be competent enough to evaluate companies and corporations operating within certain industries one is familiar with.
And speaking of the concept of a person’s ‘circle of competence’, Buffett says that defining one’s circle is a good first step when it comes to picking which stocks they should put their money on. In the end, straying outside this range can lead to losses and mistakes on the part of the investor.
Keeping Things Simple
One of the great things about business magnate’s investing philosophy is that it can be simply summed up. For Buffett, the degree-of-difficulty doesn’t really count. As he put it, he doesn’t go around looking for 7-foot bars to conquer.
He searches for one-foot bars he could step over instead. After all, investors are not ‘scored’ using Olympic-diving criteria. At the end of the day, an investor will see payoffs once they evaluate businesses correctly using key features that are easy to understand.
Know When to Pitch
Once a person has created a shortlist of companies that are within their circle of competence and have evaluated them thoroughly, they may find themselves excited to invest in these right away. Buffett recommends that one takes a pause at this point to do one more thing: time their pitch.
The thing is, investors are at risk of losing money by overpaying the intrinsic value of their chosen companies. As Buffett put it, investing in the stock market is a ‘no-called-strike game’. Don’t swing at every opportunity, wait for the good ones instead.
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