At 88 years old Warren Buffet is still one of the sharpest tools in a shed. It seems that there is nothing that this trading mogul doesn’t know about trading and investing. He can really help out both – newcomers and experienced traders. Although he doesn’t seem so, Warren is the third wealthiest man on the planet and yet, there is nothing that screams intimidating about him.
But let’s go back to what he knows. And he knows plenty. What are the best advice that Warren Buffet can give us at this time and place?
1. Investing is not a get-rich-quick scheme.
2. Keep it diverse.
3. Invest in stocks, not bonds.
4. There is no way you can time the market.
5. There is no room for emotions.
1. Investing is not a get-rich-quick scheme.
“Now if they think they can dance in and out [of the market] and buy and sell stocks, they ought to head for Las Vegas. I mean, they can’t do that. But what they can do is determinate that there’s a number of solid businesses, a great number of them, and if you own a cross section of them and particularly if you buy them over time, you basically can’t lose.”
Investing in a stock market is a very long process. And it is what we already knew. But how do we invest in a long run when we simply do not know what we are getting into and what the markets are going to behave like? He had an answer for that as well: “I know what markets are going to do over a long period of time: they’re going to go up. But in terms of what’s going to happen in a day or a week or a month or a year even, I’ve never felt that I knew it and I’ve never felt that was important.”
As we can see when it comes to being aware of the market behavior even the most well-informed find themselves on a crossroads.
2. Keep it diverse.
Do not get stuck in one segment of the market. Always go from asset to asset. Never look back and keep it different. You can always find luck somewhere if you have enough different places to go to.
“The best thing with stocks, actually, is to buy them consistently over time. You want to spread the risk as far as the specific companies you’re in by owning a diversified group, and you diversify over time by buying this month, next month, the year after, the year after, the year after.”
3. Invest in stocks, not bonds.
Buffet commented on the situation around bond and stocks rivalry saying that return from the stocks is going to be bigger in a long run that return from bonds. And overall he is right. If you look for the statistics online, you are going to find the fact that the bond market is growing much-much slower that the stock market. That means that return for bonds investors is going to be much lower than of those who chose to invest in stocks.
4. There is no way you can time the market.
There is no point is staying away from trades when you think that you are going to be more successful later as there is no way to tell whether you ARE going to be more successful in the future. After all, markets are not a time-table. Can’t possibly time the arrivals of gains and losses.
“You’re making a terrible mistake if you stay out of a game that you think is going to be very good over time because you think you can pick a better time to enter it.”
5. There is no room for emotions.
“Some people should not own stocks at all because they just get too upset with price fluctuations. If you’re gonna do dumb things because your stock goes down, you shouldn’t own a stock at all.”. All is quite understandable and easy – emotions are only going to do more harm to your trading performance.
