Latest posts by R.J. Weiss, CFP® (see all)
Why should you study Warren Buffett?
Beyond being one of the richest men in the world. Beyond his phenomenal ability to invest.
The two things I admire most about Buffett are:
- His integrity
- He absolutely loves what he does
He’s gotten to the top by telling the truth. More so, that integrity allows him to love what he does.
So, when he dispenses advice–not only is it to become a better investor, it’s also about becoming a better person.
Here are ten life changing lessons we can all learn from Warren Buffett,
Warren Buffett Lessons for Investors
# 1) “Someone is sitting in the shade today because someone planted a tree a long time ago.”
There have been a handful of other investors who have beat the market consistently.
Why then is Buffett one of the world’s richest man?
One of the primary yet little discussed reasons–he simply started the earliest and has been going the longest. When you compounding gains for 60+ years–you can’t help but build wealth.
# 2) “Risk comes from not knowing what you’re doing”
Certain kinds of investing are risky.
Buying and selling individual stocks frequently–for the average investor, that’s risky.
What about a long-term, index fund approach?
Over a 30-year period, the worst the stock market as a whole has performed was just under 8% a year.
Reference: Business Insider
# 3) “Only when the tide goes out do you discover who’s been swimming naked.”
If stocks went down 25%, how would that impact you?
What about if you lost your primary source of income?
We can’t act as if good times will last forever. Eventually, the tide will go out.
When it does, how prepared are you?
# 4) “Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.”
It’s easy to believe that more money is the thing that will make you happy.
But if you’re miserable now–you’ll just be a miserable rich person.
We now know that it’s not success that leads to happiness but happiness that leads to success.
# 5) “I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”
It’s important to make decisions within your circle of competence. Once you start adding complexity, you add risk.
Selecting individual stocks isn’t in my circle of competence–so I stick with index funds.
# 6) “It is not necessary to do extraordinary things to get extraordinary results.”
Success comes from doing a lot of simple things right. The key is DOING those simple things.
# 7) “Chains of habits are too light to be felt until they are too heavy to be broken.”
Research suggest habits account for up to 90% of our lives. Whether that’s a certain way you physically do something or a certain way you think.
It’s first important to understand how big of role habits play in our lives. Next, we must be open to change.
# 8) “I’ve seen more people fail because of liquor and leverage — leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.”
There’s plenty of ways to make money without massive leverage. So, there’s no need to take on the extra risk.
While many people have used leverage to shortcut wealth–as Buffett has said, “History tells us that leverage all too often produces zeroes.”
# 9 ) “We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
You don’t need to pay attention to what the economy is doing.
While it’s important you prepare for inevitable downturns–there’s no reason to be concerned with forecasts.
# 10) “In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world.”
In a bull market–we tend to overestimate the success of the stock market to our individual ability to invest.
It’s important to keep a level head in these situations.