In part one of “6 Things We Can Learn from Warren Buffett” we looked at removing emotion from investment decisions. In addition, how no action is often better than doing, and how index funds may be a better alternative for most investors.
Part two we are going to look at three more important lessons we can learn from Warren Buffett on how to invest.
#4: Ignore Market Forecasts and Pundits
There is no worse invention for the investing public than CNBC and the various talking heads on that channel. The reason for this is that these people are trying to say things and give investment insight that keeps them coming back on the show. The insights are often sensational and either doom and gloom or irrational exuberance. It is rarely level headed advice that investors should act on.
Buffett has been very clear that the likes of CNBC have not help investors, and instead your energy should be place on buying shares in companies that are value price and buy lots of them. No one can predict the future so it is no use trying, no matter what anyone on CNBC tells you.
#5: No One Cares About Your Money as Much as You Do
The investing business is design to separate you from your money in the form of fees and commissions. The more active investment professionals are with your money, the more they stand to make. In essence, their priorities are often misaligned with your goals.
Buffett makes all of his own investment decisions, and suggests that people take a very active interest in the management of their money. Do not blindly hand your money over to a financial advisor to manage it for you. Be active and get involve so that you are sure the right decisions are being made. Furthermore, you can ensure that you’re not just being a pawn in their game of generating more fees for themselves. Coincidentally, these higher fees almost always end up meaning lower returns for you!
#6: The Best Time to Buy Stocks is During a Market Crash
Market crashes can be the best thing for an investor looking to grow their portfolio. The reason is that when the market drops, it tends to take all stocks down with it, regardless of how great the company is. Just as the tide will bring all ships back in, it will also take all ships back out with it.
For solid companies, these market crashes are an amazing opportunity to buy stocks since you will be able to buy them at a much lower prices than when the market was up. This means that there is a potential for larger gains over the long term.
A recent example is the market crash in the first quarter of 2016. The market was hit very hard as oil prices crashed and the global pessimism was at its peak. However, if you had bought some companies at that low level, as of the fourth quarter of 2016 your gains will have been substantial. Don’t view these crashes as a bad thing; capitalize on them and put your money to work.
To become the best we can be at something it is often a good idea to emulate and learn from the best. When managing our own investments, there is no better person to emulate than Warren Buffett. In this article we reviewed eight of the best things we can learn from Buffett. If all you do is focus on these six pieces of advice, your investment performance has nowhere to go but up.
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