Warren Buffett is widely regard as one of the most successful investors of all time. A large part of this stems from the fact that he has proven his track record over decades in the market. I can look back on his career and note some key points that I think contributed to his financial success in stock picking.
Seizing the opportunity
The first piece of advice that contributed to his success was when he said that “opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”.
During previous market crashes, Warren Buffett has been able to buy when the stock market has been low. For example, back during the financial crisis in 2008/09, he invested in companies like Goldman Sachs and Bank of America. These banks were trading at extremely low levels during this period, and Buffett put out the bucket.
It’s hard sometimes to get my head around investing when the market is falling. It’s something I’ve struggled with in the past. Yet it’s clear that in order to maximise potential returns, I have to be willing to take a risk or two along the way.
The long-term Warren Buffett mindset
The second point that has served Warren Buffett well over the years is his investing horizon. He isn’t known as a short-term trader. Rather, he’s a long-term investor. This ties in with a point he made that “if you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
There’s nothing wrong with buying a stock and selling it when it reaches my target price, even if this happens sooner than I expect. Yet the driver behind Buffett’s success is that he allows the stocks to compound the returns year after year.
He also acknowledges that trying to time the market is very difficult. Therefore, instead of trying to predict the top or bottom of the market perfectly, staying invested over many years should generate higher profits.
Keeping calm under pressure
The final advice that I think has contributed to making Warren Buffett rich is to do with his emotions. He once said that “the most important quality for an investor is temperament, not intellect.”
Although intelligence is needed to make smart choices, it’s not the only quality. Being able to be calm under pressure is key as well. For example, I think back to the stock market crash during 2020. Panic-selling during this period without a cool head wouldn’t have been the best outcome for me. After all, the market bounced back in a relatively short period of time.
Of course, it’s easy to sit here and say that I need to have a cool temperament. However, it’s one of the key factors that I believe has made Warren Buffett as rich as he is today. So hard though it might be, it’s definitely something I want to try and imitate.
