Warren Buffet – a philanthropist, investor, a business magnate, and one of the most successful investors of all time.
He has made billions by investing in the stock market. He is the CEO of Berkshire Hathaway, which is a multinational conglomerate based in Omaha, Nebraska, USA.
Buffett is widely known for his value investing – always focused on investing for long term. He has done many petty businesses when he was young, but overtime he developed his skills and abilities in investing. This ceaseless dedication has made him a billionaire.
“Someone is sitting in a shade of a tree today because someone planted a tree a long time ago.”
Here are 7 ways in which you can invest in stock market like Warren Buffet:
1) Know the business
Warren emphasizes on studying a business thoroughly, you should gain the knowledge about the company, study about the financials. He emphasizes on considering the business as if it is your own before investing into the company.
Gaining rewards for investing into the stock market is for the patient ones, the impatient ones are out of the game already. When you know the business, you can predict the future of it on the basis of your study.
If you think that in the forthcoming years the company might give good returns maybe because of its new product launches, schemes, addition of services, etc., then you could buy shares of the company. If not, then you may study some other business to invest your money.
“Our favorite holding period is forever.”
– Warren Buffett
2) When you buy a stock, plan to hold it forever
When you plan to invest your money in a company then you should also think to put your money invested in it forever. If you trust the company and possess optimistic visions about it, then don’t think about the returns, just put the money in it for a long period of time. This will give you more value in return.
3) Do not trust the news
Buffet believes that news is merely noise, you should never refer to a news and develop your decision according to it. News is like a weighing machine, when some weight is placed (people start to buy referring to some news) then its value increases, but when the weight is shed (people start selling referring to some news) it weighs down to zero and you may end up with nothing.
“Risk comes from not knowing what you’re doing.”
– Warren Buffett
4) Invest in yourself
You should always trust your gut and knowledge because it will be with you forever. Warren believes that the most pleasing thing you can do than investing is learning about it as much as possible. The more you learn the more you earn. When you possess the understanding about how things work in stock market, then you can figure out your way to become a profitable value investor.
5) Invest in what you can see
Warren Buffett said, “When I buy a stock, I think of it in terms of buying a whole company, just as if I were buying a store down the street.” Quality matters, if a business lacks in its quality, then Buffet suggests not to buy them. Best stock generates profits if the company’s management, functioning, products, employees, systems, services are worthy. You must go through all these aspects and then decide which stock to choose.
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
– Warren Buffett
6) Do not put all your eggs in one basket
Buffet urges that placing all your money in a single stock will put you at a greater chance of risk than investing your money in stocks of various sectors. Whenever market plunges, not all stocks fall at the same time but particular sectors of the market, like metal, IT, finance, entertainment, etc. When you diversify your money in such sectors, then your money is not exposed to higher risk. If a sector plummets, then you have your money invested in the other sectors which will compensate the declining stock.
7) Buy Cheap Sell high
You should get a particular stock for its right bargained price. Buying at higher price can’t give you enough returns. You should check the market capitalization of the company, if a company is trading at $5 then you should not buy it because it’s cheap but should also consider the weightage and market capitalization of the company in the stock market.
The company should have higher valuation and contribution in the market. People frequently buy high thinking that the prices will increase in the future but without proper study, you should never do that, as the stock price may fall anytime soon.
“Price is what you pay, Value is what you get.”
– Warren Buffett
Stock market is a game of patience the more you wait for a stock to perform in your favor the more profitable you become. Warren Buffet represents an epitome for a successful investor. He has set a benchmark because of his extensive curiosity in business and investing.
Warren offers his entire credits to the book ‘the Intelligent Investor’ written by ‘Benjamin Garaham’. He was Warren’s teacher in college and still praises him for his learnings and achievements as a successful investor.
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