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Warren Buffett advice that could put you on the road to beating the FTSE 100

If you’re looking for the next multi-bagger or get-rich-quick stock, I can’t help you. And neither, as it happens, can Warren Buffett.

But you don’t need a lottery-sized win from the stock market to make yourself comfortably wealthy, and if you can just equal the FTSE 100 over the next few decades, you should accumulate some decent wealth. Can you beat the Footsie? I reckon you can.

I recently looked at three classic pieces of Warren Buffett advice that I try never to forget, and today here are three more.

Mistakes

Don’t hesitate in making mistakes.”

Ever made a mistake in your evaluation of a stock? I certainly have, plenty of times.

What makes mistakes in investing so much worse than in many other spheres is that you can lose some of your hard-earned money from them. That hurts, especially when you make mistakes early on. I’ve known people lose money from early mistakes, and abandon investing in shares as a result, convinced that it’s a mug’s game and a surefire way to lose your shirt.

But when you’re learning anything, you’re sure to make mistakes — you simply have to make mistakes if you want to get good at something. The secret is to learn from them and not repeat them.

I still make investing mistakes today. But they’re smaller and less costly ones, and they’re not the same errors I’ve learned from in the past.

Expert?

You don’t need to be an expert in order to achieve satisfactory investment returns.”

This answers one of the biggest fears I hear from people thinking about starting investing in shares. They feel they need an advanced education and serious expertise to do it successfully — and that’s a very understandable fear.

But you really don’t. In fact, I’ve often seen dreadful performances from people who think they know it all.

You just need to be sensible, cautious and patient. Instead of trying to analyse every detail in a company’s report, these days I rarely look beyond profit and cash figures, and debt. I reckon if a company is turning profit into cash and doesn’t have much debt, it’ll probably do fine.

If you just go for a selection of the best-known FTSE 100 stocks, picking from different sectors, and stick with it for a decade or more, I reckon you’ll do well.

What you think

You really should not make decisions in securities based on what other people think.”

I’ve left this one until last, because I find it a bit tricky. Didn’t Isaac Newton say that “if I have seen further it is by standing on the shoulders of Giants“? Don’t we all read stock analysis, pore over forecasts, and follow what our favourite commentators are saying?

And wouldn’t we have done well if we’d simply bought the same stocks as Warren Buffett himself?

What he really meant is that we should ignore the crowds shouting “buy” and “sell” when we really don’t know much about the companies they’re talking about, and instead stick to what we know.

He went on to add: “So you really want to stick with businesses that you feel you can somehow evaluate yourself,” and that’s the crux of it.

F.I.R.E. Starter

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Views expressed 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.