Investment Advice: What Would Buffett Do?

If you don’t know who Warren Buffett is, then you have probably never read a financial newsletter or you live under a rock. The man is a legend in the world of finance and it would be wise to take some time and listen to what the old-timer has to say. He might be old-school, but he knows how to make money.

After all, he sits on an estimated net worth of over $86.5 billion. Now, your aim is not necessarily to become the next Warren Buffett, but most of us just want to feel like we can live without worrying about debt. Here is an investment advice from the master that could help you attain your goal.

It’s never too early

If you think that you still have a bit of time to play around and ponder whether you want to invest in stock, think again. Buffett bought his first share when he was 11 years old. That ship has sailed for most of us, but the best time to start investing is now. The sooner you begin, the sooner you can become accustomed to regulated and well-managed spending.

When you start earning your salary, the temptation is there to buy all the gadgets you always wanted. There will be time for that, but the sooner you take a percentage of your salary every month and invest, the sooner you will start to see your funds grow. Before you know it, you will be miles ahead of your peers and reaping the rewards.

Ignore the hype

When you start on your investment journey, be sure to take your time and read up. You will soon realize that stuff sold as news and facts are only opinions and views. People love to throw their two cents in wherever they can, but numbers don’t lie.

All stocks will take a dip from time to time, but you need to find information on how your stock is performing in relation to market developments.

Don’t be too hasty to sell at the first sign of a dip. All stocks and funds will go through cycles and their performance will normalize over time. This means that the longer you are able to hold on, the better your chances are of a good return. If you can see that the hype of today will fade and won’t affect your stock, hold onto it.

stock advice


The fall

Why is it that everyone goes into a panic when the stock markets fall? At least, that is what Mr. Buffet would say. When the market is depressed, that is the time when you should be looking to gain some ground, because there is a turn around the corner.

Every investor would be tempted to bail out and sell, as that is a natural response to seeing one’s investment plummet. However, the long-term investor should take into account that all stocks have a level of volatility and that despite these dips, the stock still grows.

It is only possible to see this if you look at the bigger, long-term picture. The moral of the story is that you should rejoice when the stock falls because that means that you can cash in and buy more.

Be smart

This is one of the more difficult bits of advice that you need to follow if you are to become successful in stock investing. Being smart about your investments doesn’t always seem like the most exciting thing to do, because it means that you need to be patient. It means that you should look past the hype and find a stock that you are willing to stick to.

Buffet said that if you don’t intend to keep a stock for at least ten years, you shouldn’t bother buying it at all. Chopping and changing your investment too often doesn’t give your portfolio a chance to settle down.

It’s like an athlete who commits a false start. Everything is ready for a race and then you jump the gun and have to start all over again. Even worse, you could get disqualified.

Get your hands on a “moat”

Back in the day, strong castles were protected with a moat. It meant that there was only one way in, making it harder for invaders to break in. In terms of the stock market, you need to scope out an attractive option that has a moat.

In short, you need to find a stock that has the potential to grow without being in danger of falling anytime soon. This means that the business you are investing in has the edge over its competitors and keeps the enemy from stealing their value. However, finding companies that have a strong moat is easier said than done.

If you have any other tips for the would-be investor, drop The Chartist a comment below or share some of your wisdom. It’s always great to hear from people we can relate to.