How to invest like Warren Buffett: be the smart investor

Today it is about Warren Buffett’s Golden investment rules to be the smart investor. Warren Buffett is considered one of the greatest investors in the world. He is a ranked highly person on Forbes’ list of billionaires. That is not surprising, because of his mythical investment strategy proportions.

Warren Buffett follows several important tenets and investment philosophy that is widely followed around the globe created by himself. His strategy is a long term value investing approach passed dawn from Benjamin Graham’s School of Value. Warren Buffet’s investing strategy, Warren Buffett’s investment rules and principles are can be very useful to help investors and beginners to make smarter and good investment decisions.

Already we discuss 15 factors to consider before investing money for beginners. But to be a smart and successful investor, Those Warren Buffett’s strategies and rules will help you to get the right investment decisions.

How To Invest Like Warren Buffett: Be The Smart Investor
How To Invest Like Warren Buffett: Be The Smart Investor

If we can understand his actual techniques of accumulating wealth, then that will help you to begin running your own investments in a similar way.

Warren Buffet did not become a Billionaire as an investor from one night. He does not Invest depend on the manners which usually depicted in popular media. He makes decisions based on long term value investing strategy. Most of the investing beginners follow Warren Buffett’s investment rules and strategies to their success.

Who is Warren Buffet?

Table of Contents

Warren Buffett
Mr. Warren Buffett

Before discus, Warren Buffett’s investment rules, it is better to know who is that Warren Buffett? Warren Edward Buffett is an American Business magnate, speaker, philanthropist and considered as one of the most successful investors in the world. He is a legend in the investing field. He serves as the chairman and CEO of Berkshire Hathaway. Warren Buffett has a net worth of 82$ billion as of July 2019, making him the third-wealthiest person in the world. He was born on August 30, 1930, in Omaha, Nebraska.

Warren Buffet developed an interest in Investing and business in his Youth. He studied at Wharton School of the University of Pennsylvania. He graduated from the University of Nebraska and Columbia Business School.  

Facts about Warren Buffet

  • Warren Buffet, the chairman and CEO of Berkshire Hathaway, has a net worth of $87.1 Billion
  • He bought his first stocks at age 11, for 38$ apiece.
  • When he was a teen, he was already raking in about 175$ a month. That is more than his teachers and most adults.
  • Buffet has amassed the equivalent of 53000$ when he was 16.
  • Rejected from Harvard Business school
  • His Idol, Benjamin Jewish refused to hire him the first time he applied.
  • Buffet terrified of public speaking so he spent 100$ to take a Dale Carnegie course on Public speaking. Also, it is a worthy investment for him because that course helped him propose to his wife.
  • He does not keep a computer on his desk, and he chooses to use a flip phone rather than a smartphone.
  • He dedicated 80% of his day to reading
  • 99% of his wealth was earned after his 50Th birthday.
  • Among the investing legends, Buffett has the longest track record for beating the market
  • In 2006, Buffet announced his plans to donate his fortune to charity
  • Buffett lost about 23$ billion in the financial crisis of 2008. Also his company Berkshire Hathaway lost its revered AAA ratings.
  • In 2010, Buffett and Bill Gates announced that they had formed the Giving Pledge Campaign to encourage other wealthy individuals to pursue philanthropy.
  • In 2012, Buffett shared that he had been diagnosed with prostate cancer. But he has successfully completed his treatment.
  • Buffett began collaborating with Jeff Bezos and Jamie Dimon to develop a new healthcare company focused on employee health care.
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Warren Buffett first stock

At the age of 11, Buffet beginning the stock trading business with his sister. He bought 6 shares of Cities service, an Oil service company, at 38$ a share. He has a good confidant of making a nice profit for himself and his sister because of already he had identified Cities service as an undervalued stock. His while investment life is based on Long term value investing approach and he mainly focused on the undervalued concept.

Warren Buffett investment strategy for beginners

Buffett investment strategy is a Long term value investing approach. Also, he adds some advanced points too.

Warren Buffet’s Philosophy

Warren Buffet’s investment strategy is a Long term value investing approach which passed down from Benjamin Graham’s school of value investing. That strategy is based first purchasing securities or stocks with prices that are unjustifiably low based on their intrinsic value, then holding them until their price reflects the real value of the company. Always try to purchase securities or stocks that are believe undervalued by the market or stocks/securities that are valuable but not recognized by the majority of others.

However, Buffett takes that value investing approach to another level. Buffett isn’t concerned with the supply and demand intricacies of the market, also he is not concerned with news of popular media.

Buffett chooses stocks solely based on their overall potential as a company. He looks at each as a whole and holding stocks for the long-term. He does not seek for a capital gain, but he seeks for ownership in quality companies which extremely capable of generating earnings. When investing Buffett isn’t considering whether the market will eventually recognize its worth. He only considered How well that company can make money as a business.

Buffett’s find low-priced value by asking a few questions from himself. Those questions will help us when considering Warren Buffett’s investment rules. Below are few of them,

What Buffett looks for his investment approach?

01.Performance of the company

Looking at the past five to ten years of return on investment ratio/return on equity and ROI in other same companies. If it is larger than other same companies and if it is increasing positively during the past years, that is best.

02.Company debt

Looking at debt to equity ratio. Buffett prefers to a small amount of debt because then earnings growth is being generated from shareholders’ equity as opposed to borrowing money from other parties. If debts higher than equity, then the company may have volatile their earnings for large interest expenses.

03.Profit margins

Prefer to have not only good profit margin but also on consistently increasing Profit margins too. It is better to look at the past 5 years of Profit margins.

04. Is the company Public?

He typically considers only companies that have been around for at least 10-12 years. So he missed a lot of technology companies that have had their initial public offerings. He only invited to well-known companies only.

05.Commodity reliance

Buffett tends to away from companies whose products are indistinguishable from those of competitors, and those that rely solely on a commodity such as gas and oil and companies those not offer anything different than another firm within the same industry.  

06.is it Cheap?

That is the most important question asked by Buffett to himself. Buffett determines the intrinsic value of the company as a whole and then it compares to its current market capitalization. If his intrinsic value measurement is at least 25% higher than the company’s market capitalization, Buffett sees that company as one that has value to invest.

What is the importance of Warren Buffett’s investment rules and strategies for investing?

Warren Buffett is one of the greatest investors. If you need to success with investing with successful investment strategies, you want to learn and study about Warrant Buffett, what are the strategies and rules use to investing? What is his investment strategies and rules?

He got his success by following his own rules based on the long term value investing approach. He already achieved his success and he shares his knowledge with others. We can use his strategies and rules to be a success with our investments too. Buffett’s rules help to success in our investment as well as personal lives too.

Warren Buffet’s golden rules for investing.

By following Warren Buffett’s approaches, you can generate more profits and reduce losses from your investments. Those all are simple to understanding. So you can implement it easily. Those warren Buffett investing advice can be very helpful for investors, investing beginners as well as our personal lives. So read carefully what are the Warren Buffett’s investment rules?

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01. Rule No.01 Never lose money

 Rule No 02 Never Forget Rule No 01

This is his first rule in investing. Buffett doesn’t go into an investment prepared to lose as well as you. So buffet invests only in well-known companies he thoroughly researches and understands. Also, he believes when investing, the most important quality for an investor is temperament, not intellect.

Buffett never buys anything unless he can answer why he will pay a specific price for securities or per share for a particular company.

02. Make a list of criteria to Buy stock or investments

When investing, the first thing is to make a list of criteria to invest stock or securities. It is better to study the company’s and its industry ratios from a few years back.

03. Stay in cash is Necessary (Keep cash on hand)

If there are no companies in your criteria to invest, then don’t hurry to invest in the not familiar company to invest your money. Stay in cash until your chance coming. Cash is a position. Investment opportunities are not predictable. So cash is important to keep in hand to invest as soon as good investment opportunity becomes.

04.Invest in what you understand and well known

Buffett only invested in well know companies only. He invests in companies which he understands and believes have stable for the next years (10-15 years). Also, investing companies and industries must be familiar to you.

    “Never invest in a business you cannot understand.”

– Warren Buffett

Risk comes from not knowing what you are doing. If you are interested in a company you do not know well but hear a lot about it, then do a research first. Also, well known what you don’t know.

05.Invest in companies with competitive advantages

Invest in companies that have strategic assets, Pricing power, Powerful brands or any other competitive advantages because they have the ability to outperform in a good and challenging time. A long-term investing strategy requires investing in companies, those able to operate in both good and bad economic times.

06. Find quality companies but Never compromise on business quality

Buffett believes in Quality investing. He would rather pay a fair price for a great company than a low price for a mediocre company.   

    “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

– Warren Buffett

“Time is the friend of the wonderful business, the enemy of the mediocre.”

– Warren Buffett

07. Diversification can be dangerous.

Most of the individual investing beginners, prefer to invest in diversification because it is the best way to mitigate their risk to losses. But Buffett is not accepting that.

    “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”

– Warren Buffett

The market rarely offers great companies at reasonable prices,

    “Opportunities come infrequently. When it rains gold, put out the buck, not the thimble.”

– Warren Buffett

If you are limited only to the diversification, then you will have lost the golden chances, and you are limited to the thimbles. Also, you lose the chances of higher earnings.  

08.Require a Margin of safety

It is better to purchasing stocks with a margin of safety below their intrinsic value reduces risk and provides an allowance for unforeseen negative events.

09. Most news is noise, Not news

Buffer believes, most of the news headlines and conversations on TV are there to generate buzz and trigger peoples’ emotions to do something. So among the most financial news, he attributed and consume just only 1%.

10. Follow the Companies

After did the investments do not give up your attention. Follow your invested company on a monthly basis. Not for a Daily basis.

11.Stick with long term

Don’t let any outside or inside factor to change emotions. Never sell into a panic. Hold invest until reflects the real value of the company. For that, you need to Stick in the long term. When buy stocks, plan to hold it long-term.

    “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.”

– Warren Buffett

    “Our favorite holding period is forever.”

– Warren Buffett

12. Sell at the right time

If the company is no longer matches your criteria or investment needs of investing, Sell the stock.

13. No matter how great the talent or efforts, some things just take time. So Be patience

14. Investing isn’t rocket science, but there is no “Easy Button”.

To invest, you don’t need rocket science. Also, there is no such thing as a magical set of rules, a formula, or an ‘Easy Button” that generates beating results.

    “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.”

– Warren Buffett

15.Know the difference between price and value

    “Price is what you pay. Value is what you get.”

– Warren Buffett

16.Reinvest your Profits

When you got the first time earning, Don’t be tempted to spend your profits, reinvest the profits back to your company or business. Even a small sum can turn into great wealth.

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17. Best moves can be Boring

Most of the best movements to success for your investments can be boring. So most people may give up their try so you have to keep moving with those boring moves.

18. Accept your Mistakes

If you are in the wrong business, you have to face many problems but don’t worry just accept your mistakes and learn what you need to do for success.

19.Invest in yourself

Investment in yourself is the best thing that you can do for yourself. Nobody can get away it from you. If you have got talent and maximize it, you have unlimited access to anything.

20. Hang out with people better than you. Pick out associates whose behavior is better than yours and you will drift in that direction

21. Be willing to be different

Don’t base your decisions upon what others are saying or doing. Judge yourself by your own standards. Be different and go against the crowd. Do not be normal. Figure out what is others doing and do what is opposite. 

Be fearful when others are greedy. Be greedy when others are fearful.

  – Warren Buffet

22.Limit what you borrow

Living on credit cards and loans won’t make you rich, it generates more expenses on interest. when you are debt-free, you can save some money for more investments.

23. Never Suck Your Thumb

Gather in advanced any information those you need to make a decision. Swiftly make up your own standards.

24. Watch small expenses

Be obsess over the tiniest costs. Exercising vigilance over every expense can make your profits.

25. Assess the risk

Asking “and then what?” can help you see all of the possible consequences when making a decision.

26. You don’t have to be smarter than the rest. You have to be more disciplined than the rest.

27. Know what success really means

Measure success by how many of the people you want to have loved you, actually do love you.

Warren Buffett’s Excellent advises

On Earning

Never Depend on a single income. Make investment to create a second source.

On Spending

If you buy things you do not need, soon you will be having to sell things you need.

On Saving

Do not save what is left after spending, but spend what is left after saving

On Taking Risk

Never test the depth of the river with both feet

On Investment

Do not put all eggs in one basket

On Expectations

Honesty is a very expensive gift. Do not expect it from cheap people.

Conclusion – How To Invest Like Warren Buffett: Be The Smart Investor

Always keep in mind how he played with investing? Warren Buffet’s approach is playing the long game with the seemingly simple technique of compound interest. Try to generate more earnings from your already generated interest. Simply earning interest on interest. Also, you need to improve the discipline in sticking to investment rules and principles.

Depicted does not make his attention to day to day stock prices. Also, he not cares about what popular media has said or new technologies. Only he wants to know is if he understands the What is the Business and known well about the business. Is it undervalued? Is it making money? If both answers are affirmative to those questions, then Buffett Buys those investments. Then Plain and Simple. If Five years later any of those changes, Buffet sells it.

Above all are about how to invest like Warren Buffett. Only you need to discipline in sticking to investment rules and principles. You can learn a lot from Warren Buffett. Also, you can apply more technical. But always keep in mind Every day you cannot gain profits with investments, you will have fewer losses in some investments too.

I hope the above Warren Buffett’s investment rules and his investment strategies help you to be a smart investor. Also, it helps to make an idea about How To Invest Like Warren Buffett: Be The Smart Investor And if you have any problem or know more about How To Invest Like Warren Buffett: Be The Smart Investor, please share with us in the comments section below.   

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