Warren Buffett is a name that needs no introduction. He is one of the most successful and admired investors of all time. Whoever is interested in the world of investing and wealth creation is a keen follower of the billionaire¡¯s investment moves and advice.??
And as we step into?2024, wouldn¡¯t it be wise to learn from the 93-year-old ace investor and use those lessons when investing in 2024 and beyond?
So read on as we unfold five lessons from Warren Buffett which will help us when investing our hard-earned money:
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It's fair to say that in the last few years, many first-time investors have started trading in stocks and cryptocurrency without really understanding how they work. Warren Buffett has time and again advised investors to not chase everything that shines and to only focus on the opportunities that they understand. The real risk indeed, is when you do not what where and why you are investing in something that you do not understand.
For example, Buffett himself did not invest in tech stocks until 2016 because he did not understand technology that much. It was in 2016 when Berkshire Hathaway bought a stake in Apple after really understanding the business and its scope of growth.
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Greed and fear are two terms that define the stock market, right? The stock markets work in cycles of greed and fear.?
Warren Buffett is one such investor who has mastered this art and also encourages other investors to do the same. For instance, when there was a global economic meltdown in 2008, it was fear which was questioning the long-term prosperity of most businesses. Warren Buffett moved swiftly and made large investments in blue-chip companies like GE, Goldman Sachs, Bank of America, Mars, and Dow Chemical which per a 2013 estimate fetched a profit of over 10 billion US dollars, as per ET Money.
In his 2018 shareholder letter, Buffett wrote, ¡°Seizing opportunities does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period ¡ª or even to look foolish ¡ª is also essential.¡±
In other words, Buffett encourages investors to not follow the herd. And strip away emotions when making investment decisions, which is likely to open up more profitable opportunities.?¡°What investors need is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals,¡± says Warren Buffett.
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¡°Every decade or so, dark clouds will fill the economic skies and they will briefly rain gold. When a downpour of that sort occurs. It is imperative that we rush outdoors carrying washtubs and not teaspoons,¡± Warren Buffett once said.
Warren Buffett goes by the philosophy ¨C hold onto your money when money is cheap and spend aggressively when money is expensive.?This was seen in the year 2000 and again in 2008 when every financial expert was criticizing him for holding onto billions of dollars in cash and not deploying it in stocks. But what they didn¡¯t know is that Warren Buffett was saving all that cash to be used when companies came down from the then astronomical valuations to more reasonable prices.
Here is an investment lesson: when life gives you lemons, don¡¯t just make lemonade, but also make a lemon pie, a lemon jam, a lemon pickle, and sell all the remaining lemons at the bazaar for a fat profit, right?
¡°It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price,¡± says Warren Buffett.?
For someone who was taught by Benjamin Graham, also known as the father of Value Investing, you may expect Buffett to love a company that is available at a few cents to the dollar. However, after some poor acquisitions and investments, he made early on, Buffett came to realize that a cheap business may be cheap but may not be a profitable investment.
When Buffett bought Berkshire Hathaway, it was in the textile business and was priced at a deep discount to its book value. Click here to learn about that story.?
If there is one practice that angers Warren Buffett, it is that of taking on debt to buy stocks. Warren?Buffett has been of the view that when ordinary people borrow money to buy stocks, they are putting their livelihoods in the hands of a market whose swings can be random and extremely violent, even when it comes to a reliable stock like Berkshire Hathaway. That is why it is advisable to never borrow money, especially through loans, to invest in the stock market.?
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