Warren Buffet Financial Advice For Beginners (And You Too!)
If the average person could tap into the mind of any one person to ask for financial advice then there’s a good chance Warren Buffet would top the list for many.
We all know how amazing Warren Buffet is.
Warren Buffet is an American business magnate, investor and philanthropist with a net worth of $88.9 BILLION (as of 2019), making him the third wealthiest person in the world.
(In case you are interested the top 2 include: Jeff Bezos of Amazon who is worth $131 Billion and Bill Gates of Microsoft who is worth $96.5 Billion, though of course this ranking is subject to change.)
The great thing about Warren Buffett is that he actually has shared simple financial advice for the amateur stock picker.
By amateur stock picker he is referring to those who aren’t financial wizards or hold a job in a finance-related field.
They are everyday people like you and me – teachers, managers, laborers, and engineers.
So can the average person do a good job of picking stocks? That depends.
In the past, Buffett has insisted that investing doesn’t require a high IQ, but it does take experience to recognize a great investment.
Of course Warren Buffet has plenty of that – over 60 years of experience and he invests full-time. He also has several advantages the average person doesn’t but his basic strategies are available to all.
Buffett has suggested two different sets of instructions for non-professional investors.
If you lack knowledge about the stock market and are short on time, check out these Warren Buffet financial tips:
1 – Put 10% of your investment monies into short-term government bonds.
This is money that can be accessed quickly and easily, but isn’t rotting away in a checking or savings account.
2 – Put the remainder in a low-cost index fund.
While this isn’t the most exciting advice, it makes a lot of sense.
Few managed funds are able to match the expense-adjusted results of an index fund over several years.
Plus, the expenses and the folly of the fund manager are too much of a disadvantage.
This is the exact advice Buffet has left for the trustee that will administer his wife’s trust.
Assuming he loves his wife (and I’m sure he does!), it’s probably good advice for the rest of us. It doesn’t get much simpler than this. It also requires very little time and attention.
If you prefer to pick your own stocks, follow this advice:
WARREN BUFFET FINANCIAL ADVICE
TIP1 – Familiarize yourself with stock analysis.
Buffett has frequently given this advice to business students. It consists of analyzing every single stock on the NYSE.
When students point out that there are thousands, Buffett’s response is, “Start with the A’s”
Warren Buffett has stated that it’s easy to recognize good companies after you’ve researched a few thousand of them.
WARREN BUFFET FINANCIAL ADVICE
TIP 2 – Consider the margin of safety when you invest.
Invest in companies that are available for a discount relative to the true value of the company.
The greater the margin of safety, the greater the potential upside.
The downside is also greatly reduced.
WARREN BUFFET FINANCIAL ADVICE
TIP 3 – Invest in businesses, rather than markets.
Buffett doesn’t recommend investing just because a certain type of economy exists.
At the end of the day, it’s the quality of the underlying company that’s most important. The economy rarely enters the picture.
WARREN BUFFET FINANCIAL ADVICE
TIP 4 – Keep it simple.
According to Buffett, having anything beyond average intelligence is unnecessary when it comes to investing.
Stick with businesses that are easy to understand. It’s easy to understand how a grocery store makes its money. Biotech companies are a little more complicated.
WARREN BUFFET FINANCIAL ADVICE
TIP 5 – Be careful where you get your information.
Buffet once said, “Never ask your barber if you need a haircut.†Who benefits if you follow a broker’s advice?
Be sure to consider the source.
Unfortunately, the more mysterious the source, the more credibility we tend to project onto the source.
You might doubt your friend, but you convince yourself that the odd man on the bus certainly knows what he’s talking about.
Warren Buffet suggests an index fund for the armchair investor, but many enjoy investing and can do well on their own.
It’s important to put in the necessary work to find solid investments.
If you’re short on time, the index fund is probably your best option, according to Warren Buffet.
Otherwise do the research yourself if you want to find more solid investments.
I actually bought my first car using the money I made from buying and selling stocks within six months but I promise you, my eyes were glued on the stock market pages in the newspaper a lot during that time.
Was it worth it? Yes definitely.
Can people make money from stocks? Yes definitely – I am proof of that.
Will it take time to understand it all? Yes definitely again.
I recommend vigilantly studying the experts and seeing what advice and lessons you can learn from those who have walked the path before you and found success.
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