With an estimated net worth of $72 Billion, Warren Buffett is one of the most successful, wealthiest businessmen and investors of all time . He is widely considered to be the most successful investor of all time.
Warren Buffett has made his billions through making smart investments in the world of stocks and shares, essentially making him the smartest investor to ever walk the planet.
With the rich experience he has gained over time, he has a great deal to tell young entrepreneurs, businessmen and also common people worldwide. His value investing strategies are tried and true and have proven to be profitable and applicable in all sorts of economic environments and markets.
He built his company completely from scratch and as a result of investing made it to Forbes’ Billionaire List.
Though he came from humble beginnings, Warren Buffett is today the chairman, chief executive officer, and the largest shareholder of the multinational conglomerate holding company, Berkshire Hathaway.
His advice and pronouncements have become legendary, earning him the nickname “The Oracle of Omaha.”
ImportantAlthough he is amongst the wealthiest human beings living these days, he consistently portrayed ‘homespun’ frugality and is very popular for his philanthropic pursuits .
According to the magazine Forbes he has spent more than 15 consecutive years securing the podium of the riches people of the world.
Despite all his success, Warren Buffett still manages to remain humble and approachable. Here are five lessons everyone can learn from the renowned businessman.
Live Below Your Means
Warren Buffett is well-known for being frugal and encouraging others to do so. Despite a net worth of $39 billion, Warren Buffett lives in a surprisingly modest home .
Instead of risking bankruptcy by spending every dime he makes, Warren Buffett has chosen to live frugally and reap the rewards .
Being frugal and conservative with your spending helps you avoid waste. And when you avoid waste, you make your money work for you and save enough to invest for the future.
If you look at the most successful people in almost any endeavor, you will typically see that they are people who live the life. That is, they live a lifestyle that is consistent with their level of success.
WarningThis often leads to more than a little bit of lifestyle inflation, which helps explain how so many super successful people end up in a bankruptcy , and eventually, even the poor house.
Warren Buffett has done an outstanding job of keeping his ego in check when it comes to his lifestyle. It can even be said that he uses the same value principles for investments that he does in managing his own personal finances.
ImportantBecause he lives frugally, he can also invest more money, which will reap more rewards. Not only will his wealth grow faster, but it is unlikely he will declare bankruptcy.
As long as you have the basics you need to live a good life; there is no need to be frivolous with your cash and do more to help others.
Many people save what is left over each month after paying bills and making purchases. Warren Buffett recommends instead that you set a certain amount of money aside each month for savings, then spend the amount that is left.
Never Lose Money
What makes it impossible to say that you are never going to lose money, is that it would mean that you would never take the calculated risks that are necessary to make money in the first place.
ImportantWarren Buffett doesn’t take wild chances. He has specific criteria in regard to any business that he will invest in, and this method keeps him from entering blind speculations.
Investors should try to avoid significant losses at all costs, but avoiding all losses is impossible.
WarningSome investors interpret this statement to mean that, if you have a losing investment, you should never sell. This is not correct. Warren Buffett has made some big blunders in the past , but every time he has acknowledged his mistake, sold the position, took the loss and moved on.
If you want to avoid losing money, you should only invest in high-quality companies where the risk of a permanent capital impairment is low.
Warren Buffett is famed for making all his investments by himself for his own interests . By cutting out the financial advisers and stock brokers, he can be sure that he isn’t being given bad advice for ulterior motives. Of course, he knows exactly what he’s doing, which means that if you want to be like him, you really need to know your stuff.
Take the time to learn the stock market inside out, and you can successfully look after your own cash.
The best investors stick to what they know and avoid what they don’t. There are always going to be stocks that look like good buys, but if you don’t know the industry or sector, do you know what you’re buying?
One of Warren Buffett’s hallmark investment strategies is a investing in quality. Quality – not mystery – makes a company a long-term winning investment.
This means that he invests in companies that have well-known, well-regarded products that add value to the consumer and the economy . The companies he inverts money in are usually household names, which is to say that they have both strong market penetration and brand recognition.
Warren Buffett is more than happy to avoid companies he does not understand.
WarningIgnoring this advice from the Oracle could only cost you time and money, as well as cause frustration. You can only genuinely value a business if you can predict future cash flows . This is impossible without an understanding of the company’s operating environment.
This is a golden rule that you should always have present: the price should never be important if the value justifies it.
ImportantWarren Buffett never pays full price for anything , including the investments that populate his portfolios. He does this by buying companies that are selling at a discount to their real value.
This strategy is more commonly referred to as value investing, which is the practice of buying stock in companies that are undervalued.
Play For The Long Haul
It doesn’t matter if your current strategy is not bearing fruit now, because the result that matters is not one game but however the final championship .
The long and rocky road to success holds many valuable lessons and makes victory that much sweeter. So, be patient and keep pressing on.
Warren Buffett has always said that the sooner you start investing, the better off you’ll be , because you can take advantage of compounding. Leave it too late, and you’ll need to invest more later for fewer rewards. So, if you aren’t investing yet, start now.
When it comes to stocks and shares in particular, investing in the long term will most likely be able to reap more benefits than hoping to make a quick buck.
ImportantWhen you look at the companies that Warren Buffett owns individually they’re all long-term investments. Buffett will buy stocks and hold onto them – not for years – but for decades. As long as the business is strong, the investment will payoff.
Warren Buffett’s track record, and the size of his portfolios, are testaments to the success of this strategy.
Another thing that is immediately obvious about Buffett is that you’ll never see him running with the herd. That means no “Nifty Fifty” stocks, no hot stock of the year investments – and nothing that even hints at being trendy.
WarningYou won’t see Buffett investing in trendy stocks like social media sites and hot technology. While sites like Facebook may be hot today, Warren Buffett’s issue is that there’s no way to know that they’ll be just as hot five years down the line.
Don’t obsess over quick results and instant gratification. Success doesn’t come overnight—not even for Warren Buffett.
Risk Comes With Reward
Think about the worst and best possible scenarios and promptly make the most rational, progressive decision. Assessing risks carefully helps you see where you are struggling and can guide you to make smarter decisions.
Warren Buffett way to wealth is actually a very risky one by conventional standards.
ImportantHe doesn’t invest heavily in safe assets like bonds and treasury bills. He invests primarily in stocks . But stocks are not nearly as risky as people tend think – as long as you know what you’re doing. And he clearly does.
When you’re an entrepreneur, taking risks is pretty much essential, but you should always be assessing the risk that you are thinking of taking.
Warren Buffett is able to eliminate most of the risk associated with stocks, by buying them cheaply enough that the speculation – and high prices – are completely squeezed out. Most of the positions that Buffet takes have nowhere to go but up. That is the result of buying after everyone else has sold out their positions.
When you assess a risk and weigh up the potential advantages to disadvantages, it will always help you make a better choice for yourself.
Successful investing is about more than just buying winners . It’s also about having the discipline to sell as information changes and the humility to know when you’ve made a mistake.
According to Warren Buffett, you would be buying heavily after a market crash, and keeping your powder dry when a bull market has been around for a few years.
Buy when the blood is running in the street
If you buy when everyone else is selling, you will be able to get positions in strong companies for a lot less than you would pay when the market is running strong and everyone is buying.
sell your losing positions in strong markets
If you wait to sell your losing positions until the market is particularly strong, you will minimize your losses. In some cases, you might even recover a profit.
Warren Buffett serves as proof that when a professional has the right goals in place, he can accomplish anything . He is a very interesting man, so if you ever get a chance to read more about him, you’ll learn a lot!
Through carefully researching his life, professionals can learn lessons that will help them as they build their own businesses and invest their earnings.
ImportantEven if you are not into investing, you can take all of these lessons from Warren Buffett and apply them to your life and business, and with positive results.
Just as Warren Buffett lifestyle is incredibly simple considering his stature in the world, he also does his best to avoid the spotlight.
But the success that he has is determined by the success of his business, rather than on his participation in out-of-the-box activities, or inflammatory public comments, designed mostly to draw attention.
Warren Buffett realized it was better to shut off the noise years ago.
WarningIn today’s world, we are constantly bombarded with news and views, most of which is rubbish. He makes his own decisions based on detailed research , and there’s no reason why other investors shouldn’t follow this approach if they have the time and commitment.
And remember in businesses and in people, better quality businesses are more likely to grow and compound cash flow; low quality businesses often erode.
What do you think about Warren Buffett’s success lessons? Which one of them caught your attention? Leave a comment below.