There are people who have made it big when it comes to investments, and they are the right people to learn from if you want to enter into the field of investment. We will explore some tips shared by Warren Buffet, one of the biggest investment gurus in the world.
Invest in what you know
Warren Buffet insists that you should never invest in a business you do not understand. If you do not understand how the business operates then it’ll be very hard for you to predict how it will perform in the market. If, for example, you are in the fashion industry, you will not have an understanding of the biotechnology industry and will therefore not be able to make any sound decisions when it comes to knowing how it will perform. There are so many industries that even though you’re not directly involved in, you may have an understanding of. This would provide a better investment vehicle for you because you at least have some knowledge.
Understand the quality of the business.
Buy into companies that are high quality and have the potential for long-term growth and opportunities. Buying stocks or shares that are low in price hoping that they will rise one day is not a very good idea when buying into a company. Buy into a good company, even if the price may be at a higher point because there is a possibility that the business will continue on an upward trajectory.
Buy with a long term plan.
Warren Buffet advises that if you buy for a short period of time, then you’re better off avoiding the whole investment totally. Buy with the thought of holding onto the stocks or shares forever. You should not also buy and sell all the time, buy and sit on it.
Be careful about diversification.
This may surprise many because one of the golden rules of investing is, do not put all your eggs in one basket. However, Warren Buffet has a different thought process. He feels that if you buy into a company that is doing well and buy with the long-term in mind, and then you do not need to have so many portfolios. He, however, points out that when an opportunity comes, you should, by all means, take it up. Having a very diverse portfolio is normally due more to fear than a proper thinking process. It also makes it very difficult for you to keep a tab on what is happening to your investments.
Investment is not easy.
While he agrees that investment is not rocket science, it does not mean that the person with the higher IQ will do better than the one with a low one. There is no formula in investment because there’s no sure way of beating the market. You need to be very critical in your thinking and not be afraid to learn.
In investment, it is important to listen to people who you trust. Choose people who can give you proper advice due to their knowledge and expertise. Use the advice they give to manage your portfolio so that you are sure of getting returns.