3 Warren Buffett tips I’d follow to retire rich

Our writer looks at three investing habits of Warren Buffett he reckons can improve the prospects of retiring rich through investing.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Legendary investor Warren Buffett isn’t keen to retire – he’s still working hard in his nineties. That is ironic, as his investing skills have earned him funds many people contemplating retirement would envy. The good news is that even if Warren Buffett isn’t keen to retire from his day job at Berkshire Hathaway, I could follow his tips to improve my own chances of retiring rich. Here are three of them I’d apply.

1. Do less, not more

One belief many people have is that the more they do, the more likely they are to retire rich. That may hold true when it comes to work, though maybe not. But Warren Buffett doesn’t reckon it holds true when it comes to investment. He is an advocate not of activity, but of relative inactivity.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

By trying to spot every little opportunity that comes our way, Buffett reckons, we can miss the big picture. We also increase our risk taking and may not have dry powder when a genuinely big investment opportunity comes along. Buffett reckons that all investors encounter a few great opportunities in their lifetime. He advocates waiting years or decades for them if necessary, but when they come committing to them in a big way. As Buffett says, “you(‘ve) really got to grab them when they come. Because you’re not going to get 500 great opportunities.”

To discipline the mind, Buffett suggests imagining that one had a punch card with twenty spots, and one had to be punched out whenever one made an investment trade. Doing that would bring a lot more discipline and help people build retirement plans based not merely on good opportunities, but only on what they perceived as great opportunities.

2. Focus on capital retention

Another surprising lesson from Warren Buffett sounds implausible because at first it seems so obvious. As he says, “Rule number 1: never lose money. Rule number 2: don’t forget rule number 1.” That truism actually contains powerful wisdom. Almost all investors lose money sometimes, including Warren Buffett himself. But it’s the second rule which matters here. Buffett is saying that, in order to chase attractive seeming opportunities, it can be easy to lose sight of the importance of capital preservation.

That could include bending one’s own risk management rules, speculating rather than investing, focussing on possible return not likelihood of loss, or any of a plethora of other habits common to millions of investors. Buffett sees that as a massive mistake – and he’s richer than any retiree in the UK, so I think he knows what he’s talking about.

Tempting though it may be, instead of zooming in on the best looking opportunities, Buffett cautions us always to focus just as much on how risky any investment may be.

3. Warren Buffett on knowledge

The third lesson from Warren Buffett is always to focus on one’s circle of competence when investing. No matter how tempting shares may seem, if they are in an industry he doesn’t understand he simply won’t buy them.

One can expand one’s circle of competence, by learning new things. But focussing on what one knows seems like a sensible approach to me when it comes to improving the chances of rich investment returns.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Social media and digital online concept, woman using smartphone
Investing Articles

Will Lloyds shares recover in 2022?

Lloyds shares have struggled this year and the looming recession won't help. But I'd still buy them today.

Read more »

Two hands holding champagne glasses toasting each other with Paris in the background
Investing Articles

Can the stock market make me rich even now?

Here are three ways I'm coping with the stock market's recent bout of weakness and aiming to build wealth in…

Read more »

Cogs turning against each other
Investing Articles

3 top investment trusts to buy right now

Investment trusts offer a wide range of options for investors. And in troubled times, they provide some safety through diversification…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Why hasn’t the FTSE 100 crashed in 2022?

The catastrophic events of 2022 have left investors around the globe fearing the worst for stock markets. And some have…

Read more »

Trader on video call from his home office
Investing Articles

2 inflation-resistant FTSE 100 stocks to buy today

Soaring inflation could dent my returns if I don't take care. Here are two top inflation-resistant FTSE 100 stocks I'd…

Read more »

Tabletop model of a bear sat on desk in front of monitors showing stock charts
Investing Articles

Why a bear market is an investor’s best friend

A bear market can certainly be scary. But any investor tempted to sell might benefit by looking at Warren Buffett's…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The Rolls-Royce share price could be stuck below £1 for a while. Should I buy?

The Rolls-Royce share price has been trading at penny stock levels since April. Could the stock be a bargain at…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’m aiming to make £45,000 in passive income with UK shares and never work again!

Investing regularly in UK shares can generate a substantial passive income over the long run. Zaven Boyrazian demonstrates how.

Read more »