Top 5 Investment Lessons From Warren Buffett

With a networth of more than $ 80 billion, Warren Buffet is arguably one among the greatest businessmen and investors of all time but more importantly, he is one of the best teachers  on investing. Time and again, in his interviews and annual reports, he offers invaluable lessons on investing that helped him become a billionaire. Here is a list of the best lessons from Warren Buffett that you can use to reach your financial goals .

1) Invest in yourself first

Warren Buffett once said, “The most important investment you can make is in yourself” and we could not agree more.  Why is that, in life, we invest in everything else but ourselves? This is one such investment which involves zero risk and 100% returns.  Taking up a class to learn a skill, getting a gym subscription, eating the right kind of food and buying books to improve your personality are all the different things you can do to invest in yourself.  Realize your full potential and constantly thrive to become a better version of yourself.

2) Invest in what you understand best

Buffett constantly emphasizes the importance of having an area of expertise and operating within that area.  Especially, when you are just starting off as an investor. You should have a clearly defined business model, investment style and an area of expertise and invest only within that area.  Yes, you should constantly learn and try to expand your circle of compentence but until then you should not invest in an area where you are not skilled.  For instance, Cryptocurrency is an investment platform that became popular in recent years.  Every other person you meet talks about investing in it. If that is not a platform you understand, then you should steer clear of it and instead invest in something which you understand better, like stocks.

3) Understand the qualities of a good company

Buffett’s list of essential characteristics to invest in a company is surprisingly small.  He would prefer a company that is easy to understand, with good long term prospects, a consistent operating history, high return on equity, high margins and a solid management team.  Every company has factors which are knowable, unknowable, important and unimportant. Buffett recommends investing in businesses whose important factors are knowable. If you are looking for long term investments, it is important to be able to predict what the company  would look like in 5 or 10 years hence and understandable businesses should be preferred.

4) Educate yourself well

Everyone should be an investor, but not everyone can choose investments on their own.  To be a successful investor, it takes years of study to master the essential skills for stock picking and then a few more years to learn how to successfully apply those skills.  Warren Buffett read every book about investment in his local library by the time he was 11 years old. If you are not constantly willing to learn and upgrade your skills, it is very unlikely that you  would be successful as an investor.

5) Be patient

“Get rich fast” is the mantra most modern investors use while making investments.   According to Buffet, the right mentality for investment is “get rich slowly and steadily.”  Great investment opportunities are rare and one should have ample amount of patience to wait for the right one.  Investors who can not wait to reach their financial goals focus on short term goals and quarterly achievements. This attitude, encourages them to sell what underperformed and buy what overperformed in the market.  This is an extremely risky process which usually does not work and what is more, you may find yourself in a pool of debt by the end of the year. Therefore, Buffett advises investors to focus on long term returns and be patient enough to wait for the right opportunities as it is dangerous to try to outperform the market in the short term.

To succeed as an investor in life, you need the right kind of knowledge and skills.  To master these skills, countless hours, hard work and perseverance are required. Most importantly, to be able to put in the hard work requires passion.

Comment below and let us know which of these lessons inspires you the most.