Learning from the best in the investing game has always been a strategy worth pursuing. If you are committed to becoming a better investor, there’s a lot you can learn from the likes of Benjamin Graham, Warren Buffett and Richard Branson. These investors offer a wealth of knowledge that could help anyone become a better investor. Let’s dive straight in and explore their investing lessons.
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We can only kick this off with the father of the value investing himself. In the words of Warren Buffett, Graham’s book, The Intelligent Investor: The Definitive Book on Value Investing, is one of the most influential investment guides ever written. It preaches the important investing principle of loss minimisation over profit maximisation.
Benjamin Graham wants investors to be guided by a rational plan that is completely shielded from the emotion that comes with both good and bad days in the market. He believes investors should ignore the short-term noise and keep their decisions focused on their long-term investing strategies.
One of the many investing lessons investors can learn from Warren Buffett is to have an investment philosophy. And for him, that has always been about having strong conviction. He strives to understand the businesses he invests in. If they make sense to him and he deems them worthy, he will bet big on them. If he doesn’t understand them or their industry, he will simply walk away without regrets.
Invest in stocks over the long term
It’s no secret that Warren Buffett is a fan of investing in stocks that he plans to keep for life. He strongly believesn that over time, equities will do well. He also preaches the importance of taking the long-term approach to investing. This is why he is not so interested in the macroeconomics and the political environment that could affect the stock price in the short term. He is excited by the prospect of owning a piece of an amazing business with long-term earning potential. And this translates to more wealth for him and his shareholders.
His view is supported by the CNN Money guide on investment basics, which points out that over a longer period of time, stocks outperform all other investments. According to the guide, in the long run, stocks have returned an average of close to 10%.
Low-cost index funds
For the DIY investor, Buffett doesn’t recommend stocking picking. He advises investors to “own a cross-section of businesses that, in aggregate, are bound to do well.” It’s an investing lesson we can put into practice by investing in a low-cost index fund. It’s what Buffett plans to do. In the event of his death, his trustees are instructed to invest 90% of the cash for his wife into a low-cost S&P index fund.
You may be surprised by this entry on the list, but there is one valuable investing lesson that we could take from Richard Branson. When picking stocks, especially start-ups, for him the most important aspect is understanding the concept of the product at a first glance. This gives him confidence that the end user will also understand it.
He believes that if a product solves a problem for the customer, then there is a greater possibility of someone purchasing it. By extension, you can use this idea when picking investments. Before you invest, simply ask yourself how the company’s services or products are going to improve people’s lives.
It goes without saying that fortune won’t come easy and you’ll make mistakes along the way. It’s essential that you do your own due diligence in the companies you plan to invest in. However, being aware of these great investing lessons could really help you maximise profits and minimise losses.