8 investing secrets I learnt from Warren Buffett!

Warren Buffett has built a $100bn+ fortune through careful investing over eight decades. Here are 8 investing lessons I learnt from Buffett’s wise words.

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Buffett at the BRK AGM

Image source: The Motley Fool

Warren Buffett is one of the world’s richest people, worth over $100bn today. He’s also been investing for over 80 years, ever since he turned 11 years old. What the ‘Oracle of Omaha’ doesn’t know about investing isn’t worth me knowing. Here are 8 investing tricks I learnt from Warren Buffett’s wise words that have made me a far better investor today.

1. “Do not save what is left after spending, but spend what is left after saving”.

This Warren Buffett quote helped me invest directly from my monthly pay, preventing me from splurging my money and always ending up broke. After all, if I can’t save, then I can’t invest, right?

2. “The worst investment you can have is cash. Cash is going to become worth less over time”.

Here, I learnt from Warren Buffett that I would never get rich by squirrelling every bit of cash away in deposit accounts. I have to risk some of my money in order to earn higher returns. And that means investing in assets such as shares, bonds, and property.

3. “Just buy something for less than it’s worth”.

This Buffett saying helped mould me as a value investor. These wise words taught me it’s okay to pay premium prices to invest in excellent companies. After all, quality costs more, right? Hence, after 35 years, I’m still searching out lowly rated stocks with high earnings/dividend yields.

4. “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes”.

Here, I learnt from Buffett that investing is about buying shares for the long term, not gambling or trading on short-term price movements.

5. “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price”.

This is one of the most important things that I learnt from Warren Buffett. These days, I aim to buy into world-leading businesses with great growth prospects. Gone are the days when I would buy beaten-down stocks, only to watch them take more beatings!

6. “Never invest in a business you cannot understand”.

In my early years as an investor, I used to buy stakes in all kind of weird and wonderful businesses. Most of these ‘scattergun’ investments lost money one way or another. Today, I would far rather invest in established companies selling great products/services and led by good managers.

7. “Never bet against America”.

As a proud American, Warren Buffett has witnessed nine decades of US global dominance. Today, the US is still the world’s largest economy, with the richest population and the biggest stock markets. That’s why, like Buffett himself, my family’s wealth is largely invested in US stocks.

8. “The best chance to deploy capital is when things are going down”.

This Buffett maxim helped me deal with my fear of stock market crashes. In the depths of the 2007-09 stock market meltdown, Buffett invested 100% of his personal wealth into US equities. Since March 2009’s low, the S&P 500 index has gone from 666 to 4,650 today. That’s almost exactly a seven-fold return.

As the master also said, “Be fearful when others are greedy, and be greedy when others are fearful”. Nowadays, I happily take profits by selling when stock prices have soared. Likewise, I always keep a chunk of cash in reserve, ready to deploy when the next stock market crash arrives!

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.

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.

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