Buffett’s Top Tips for Investment Success
A website I came across – GoBankingRates.com – profiled 12 personal finance experts in December 2014 for their insights on growing your wealth in 2015. I plan to share their tips with you today and I’ll start with one of my favorites – Warren Buffett’s advice on succeeding at investments in 2015.
- Put Your Estate in Index Funds
In his 2014 letter to Berkshire Hathaway shareholders, Buffett revealed his estate plan, reminding readers to keep their investments safe, low-cost and long-term. Buffett plans on leaving all of his cash for his wife – with 10% in short-term government bonds and 90% in a very low-cost S&P 500 index fund. He believes the trust’s long-term results from this policy will be superior to those attained by high-fee managers.
- Stay Away From Bitcoin
Buffett’s problem with Bitcoin is that it’s not any kind of investment at all, because it doesn’t have value. He sees it more as no more than a method of transmitting money – an electronic version of a check – with which can be replicated and has no intrinsic value
- Learn How to Read Financial Statements
Buffett wants you to take all the accounting courses you can find because accounting is the language of business and it’ll make you comfortable with reading financial statements. As he puts it – a little study early on, but it pays off big later on.
- Focus on Saving, Not Getting Rich Quick
He says the biggest mistake is not learning how to save and trying to get rich quick. Buffett believes it’s pretty easy to become well-to-do if you save and invest regularly but it’s no where as easy to get rich quick.
- When Stock Prices Drop, Buy — Don’t Sell
Buffett likes to buy when markets go down, and the more they go down, the more he likes to buy – because he does his analysis thoroughly and buys businesses for their long-term growth potential.
- Stop Pretending to Be an Expert
He says, if you invest in things you don’t know, you’re just gambling. He says you’ll do just fine if you recognize your limitations, stick to a plan and stop pretending to be an expert on the market. He likes to keep things simple, not swing for the fences or look for quick profits.
Tips from Other Experts
Okay – that was the Sage from Omaha… now here are some more pieces of advice from other noted experts in the field:
Shift your mindset from ‘victim’ to ‘champ’ and put your talents, your intelligence and your strengths to work.
- Stop seeing yourself as a victim — of the job market, economic downturns, etc. – and stop relying on someone else to ‘save’ you. Instead, shift your mindset from ‘victim’ to ‘champ’ and put your talents, your intelligence and your strengths to work – to take control of your life and your financial future.
- Give yourself a raise in 2015. Do this by either mustering up the courage to ask your boss for a pay raise, or by starting a side business, or increasing your billing if you already have your own company. Then make sure you’re saving at least 5 percent of your total income!
- Work towards setting specific financial goals and the steps needed to achieve them – with an accountability partner. Money management is a team sport, and in 2015, find someone who can help you build and nurture a meaningful financial plan where you prioritize your needs over wants and stick to the plan.
For example, if you want to buy a house – don’t give yourself the vague goal of saving up for a down payment. Instead, commit to saving, say, $250 each month, by cutting expenses and transfer this money every month to your savings account until you reach your desired down payment.
Put your goals in writing and track your progress to motivate you.
- Go back to the basics – spend less and save more. There are hundreds of ways you can do that and your challenge is finding the ways that work for you. It’s not just the big savings that matter. Change your mindset and realize that no savings are too small, they all add up. Educate yourself to really understand where you are spending your money. Have a budget that includes all of your expenses. Write it out. Know it inside and out. Learn what areas in your budget you actually have control over. Have a plan and keep it simple. See every penny saved as a small victory.
- Get out of debt. Interest rates could rise in 2015 – it’s a possibility, not a certainty, but be prepared – if rates rise, 2015 could be even more expensive for anyone carrying credit card debt, so now is the time to minimize credit card debt before interest rates rise.
- Make 2015 the year that you choose to invest in your personal self-development and hop out of your comfort zone – learn something new, travel, take risks and practice your negotiating skills.
Investing in yourself will help you gain a much-needed edge in a job market that is becoming increasingly competitive. Being proactive now is vital to ensuring your career, earnings and financial success in coming years. Rather than reacting to changing times, plant some seeds now so you can be proactive and remain competitive in 2015 and beyond.