7 Investment Lessons we can Learn from Warren Buffet

Investment advice from The God of Investment!

Who hasn’t heard of The Oracle of Omaha? The celebrated investment guru, nicknamed the Sage or Oracle of Omaha is now in his 80’s and he still helms one of the world’s most profitable companies, Berkshire Hathaway. He also happens to be the second richest man in the world. Lucky? No, just smart investment decisions.

If you ask me, Warren Buffett is the right person to seek investment advice from, especially if you’re planning to invest your money somewhere. And he’s got lots to dish out, stemming from his years of experience in investment.

• Invest in industries you understand Dear investor, steer clear of fads. The hottest stocks today can turn into the worst investments tomorrow. That’s why you need to look out for industries whose production and management process you understand. This can help you forecast how the company will perform in the future, and save you from disaster investments.

Tip: In an annual shareholder letter to Berkshire Hathaway, Warren Buffett admitted that he didn’t invest in tech companies because he didn’t understand them. This is by large my favourite piece of advice too.

• Carry out in depth research on your potential investments first Warren Buffet advises investors to only buy stock in a company after getting to know everything about it, and that includes its mission statement, its product, its financial statements, management plans and how the company uses its money. That way, investors can settle on companies helmed by proper management with a future ahead of them.

Tip: Mr Buffett spends up to 18 hours a day analysing hundreds of companies each day too.

• Consider value first The value of a company should be a determining factor for any investor before a decision is made. Rather than buy stock in 15 low value companies, the investment expert advises getting stock in 5 high value companies instead. Plus, according to Buffett, investors should look out for companies selling their stocks at prices lower than their intrinsic value.

• Trust your investment decisions when you make them You can’t determine what’s going to happen after you buy or sell a stock. No one has that power of accurately predicting the future, and anything can happen. Regardless, you still need to stand by your decision when you make it. As an investor, doubting your decisions or procrastinating over them is probably the worst mistake you can make because every second counts. Do enough research beforehand and then make your decision once and for all.

Tip: Mr Buffet wasn’t sure about his 1998 purchase of General ReInsurance, and he has admitted that it nearly cost him his biggest success ever.

• Take advantage of economic crises This seems to me, the best piece of investment advice ever. Remember the dot com bubble and the 2008 economic recession? Warren Buffett advises investors to be ready should such incidents occur. Many valuable companies start selling their stocks at precariously low prices for fear of impending catastrophe, and that’s where investors can swoop in.

• Get up after you fall During 2008’s economic recession, Warren Buffett’s Berkshire Hathaway suffered a 77% drop in earnings, with many of his other businesses suffering big mark-to-market losses. Still, he looked ahead, planning for what was coming after the recession. Today, Berkshire Hathaway appears on the list of the world’s strongest and most profitable companies.

• Timing is key. This applies to almost everything in the world. Warren Buffett has one piece of advice for you that’s worked for him. Sell your stocks when the market is up and buy winning stock when the market goes down. Simple.

With these tips and more from one of the world’s biggest investors, making your investment should come a little easier.

Good luck!