Warren Buffett is quite possibly the greatest investor of all time. For decades, the CEO of Berkshire Hathaway — nicknamed the “Oracle of Omaha” — has shown his ability to read Wall Street like a book. He has a net worth of nearly $82 billion, according to Forbes, making him one of the richest people on the planet.
Despite his investing prowess, there have been a few Warren Buffett mistakes over the years. Unlike some executives who try to pass the blame to an underling, however, Buffett owns his errors and assumes full responsibility when he fails to deliver to shareholders. If you’re trying to sharpen your investing game, you might learn a lot from Buffett’s investment tips.
Invest in What you know… and Nothing More
This is a very valuable advice coming from a great man. He said that most businessmen make a mistake in investing in schemes and ideas they know nothing about. One should avoid investments in complex things. Only invest in something you have a strong grasp upon. He said that one should never invest in a business they do not understand, else they are bound to be tricked and doomed. He told everyone to keep their businesses simple. This way, one can avoid many mistakes and just stay in your circle of competence.
Never Compromise on Business Quality
It may have occurred to you at one point of time to reduce your quality and therefore reduce the raw material cost, but sell at the same price. One should know that the buyers are not fools. If you want to maintain a loyal customer base, you need to maintain your business quality. He also said that make time your friend. Have patience and invest well. It is better to invest in a wonderful company at a fair price than investing in a fair company at a wonderful price.
When you Buy a Stock, Plan to Hold it Forever
Once you buy a high-quality business, hold on to it for long. Never think of selling your stock as soon as you buy it. Forever should be your holding period. He believes that it is tough to find a long-term business that you can hold on to forever. So, if you have found something, do not let it go. He also said that quality businesses get higher returns and increase in value over some time. He also said that constantly buying and selling stocks that lead to loss in form of taxes and trading commissions.
Diversification can be Dangerous
As per Warren Buffet, too much diversification can lead to losses. He believes that invest in conviction on your best ideas. As per him, the market rarely offers great companies at reasonable prices. He believes in long-term investments and weighs the same factors for long-term economic characteristics. He believes that a good businessman should always be on the lookout for good opportunities. These may come infrequently. If you diversify too much, you will not be able to keep tab of the current events impacting different companies.
These are some of the greatest and most useful Warren Buffet investment tips.