He is the richest man in the world! He is also the world’s most respected investor and rightly so, his estimated net worth is $62 billion…Yes, it’s ok to say WOW! He is a man that I greatly admire. Not for his wealth but for his simplicity and pure business genius.
Warren Buffett’s mantra on value investing is a proven formula for profits in any market condition.
Some of the secrets of his success are: (Sanjeev Sinha, The Economic Times)
1. Simple Living & High Thinking
Were you aware that this is one of his top secrets? Most people with modest means can claim to be leading a simple life. But give people money and they will start behaving like they own the world. However this is not the case with Warren Buffett who chooses to lead a very simple life, considering who he is. E.g. he lives in a house he bought years ago and wears simple clothes.
“I just naturally want to do things that make sense. In my personal life too, I don’t care what other rich people are doing. I don’t want a 405 foot boat just because someone else has a 400 foot boat,” he says.
2. Have No Unrealistic Expectation
In contrast to several investors, Warren Buffett has never had any unrealistic expectation from the market. It’s not surprising to hear him says that, “earning more than 12 per cent in stock is pure dumb luck.”
“During the 20th Century, the Dow advanced from 66 to 11,497. This gain, though it appears huge, shrinks to 5.3 per cent when compounded annually. For investors to merely match that 5.3 per cent market-value gain, the Dow - recently below 13,000 - would need to close at about 2,000,000 on December 31, 2099!”. So, “if your adviser talks to you about double-digit returns from equities, explain this math to him,” he says.
3. Do Not Time the Market
Warren Buffett does not try to time the stock market, although he does have a very strong view on the price levels appropriate to individual shares.
Most of the investors, however, do just the opposite, something that financial experts are forever warning against.
4. Do Not Diversify Too Much
He likes to keep his investment portfolio limited and simple, and believes in adopting simple investing strategies. “I want to be able to explain my mistakes. This means I do only the things I completely understand,” he says.
Learning from him, you must keep your attention limited to selected stocks and investment avenues, and do not invest in too many stocks. “You must also resist temptation to stray from your guidelines: If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes,” he says.
5. Do Not Invest Money Where It Has Been Earned
Buffett insists on not reinvesting profits in the same business, as no one can guarantee you the same return again.
“There’s no rule that you have to invest money where you’ve earned it. Indeed, it’s often a mistake to do so,” he says.
6. Do Not Follow The Herd Mentality
It is easier to do what others do and difficult to shape your own way out. You will find that the second strategy will lead to success in the long run.
This philosophy holds true for the stock market as well. “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well,” Buffett says.
After reading some of Warren Buffett’s success secrets I have realized that I am one of the worst investors ever, I had a similar realization when I lost significant amount of money in stocks. Just wish that I had discovered these secrets before.
But this is the great part about learning from your mistakes. They say that a new investor must feel the pain of loosing money in order to learn and improve. Trust me I felt the pain and improved significantly, but you don’t have to make the same mistakes that I did. Now you have Warren Buffett’s top secrets to success.
Warren Buffet
“Rule No.1 - Never Loose Money. Rule No. 2 - Never Forget Rule No. 1″
There is so much more that we can learn from Warren Buffet. Watch this space.
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Though I am analysing each and every aspect of investing and growing my hard earned money, I assuume Warren as my Guru in Banking Finance and everyone helping aroiund the world. What I will get and give help to others will tell the time to come. Have a long association