5 Tips for Long-Term Investment Success from Warren Buffett
When it comes to long-term investment success, few people are more knowledgeable than billionaire Warren Buffett. He’s made his fortune by investing wisely, and his wisdom can help you to do the same, whether you have a small sum to invest or millions of dollars.
These five tips from the “Oracle of Omaha” can help guide your decision making and lead you to wealth and security.
1. Fear in others is an opportunity for you
Investors who only put their money into the market when things are going well end up paying a high price for reassurance that isn’t genuine. Instead, be alert for signs of fear and panic in the marketplace or among business owners looking to get out. These are often ideal times to invest.
In other words, if others are fearful, see it as an opportunity to invest at value prices. Keep your head and focus on the long-term prospects of the investment. Buffett advises to learn to smell fear, welcome it, and use it to your advantage. The irrational fear of the herd is often a good friend to value-minded investors. Swift and decisive action can help you to make the most of it.
2. Invest in what you understand
Investments can seem attractive and appealing, but if you don’t understand how they work, they’re likely to be a bad choice. Don’t be that friend always rushing to the “perfect investment opportunity” without really knowing what they’re doing. Avoid all investments you don’t know how they work.
Remember, it’s more about how well you understand the investment than how good its numbers look on paper. If your understanding is hazy, and the numbers good, walk away.
3. Maintain a healthy margin
Buffett advises keeping a margin or a safety net against uncertainty. This means having enough cash to help you through times of uncertainty in your business or the economy.
If you’re a regular person, having a sizable amount in your bank account or low-risk investments such as bonds, or mutual funds could do the trick. This way, when things go awry in the economy, or in your business, you will have a backup plan that will keep you from making rash decisions.
Buffett himself has a $20 billion cushion, but that may not be realistic for most people. Figure out the amount you need to keep safe for you to sleep well at night and work towards it.
4. Concentrate on long-term results
One of the secrets behind Warren Buffett’s investment success is patience. An investment that may seem unattractive in the short-term can be an excellent opportunity in the long-term. Avoid looking at short-term gains or losses.
Try to focus on the long-term prospects of the investment. By doing that, you will be able to stay calm even when other people are panicking. Remember that tremendous value is most often gained over the long term.
5. Take full responsibility for your investment decisions
While a great advisor can be helpful, it’s ultimately up to you to take responsibility for your investment decisions.
Buffett himself takes responsibility for the success or failures of his investments, and you should too. Don’t blame others if you made bad investments, instead, own your responsibility and learn from it.
Learn from Warren Buffett’s Investment Advice
Following these tips, it is possible to achieve long-term investment success. Buffett’s advice is practical and has worked for him and many investors over the years.
No matter the amount you have to invest, keep your head when others are panicking, focus on investments you understand, maintain a healthy margin, be patient and focus on the long-term prospects of the investment, and take full responsibility for your investment decisions with a good plan.
By following Warren Buffett’s advice, you too can become a successful investor.