Warren Buffett is best known for being the world’s most successful investor. Given his present net worth of more than $100 billion, it is not surprising that Warren Buffett’s investment strategies have attained mythical status. So, how does he do it? What’s the secret to his success?
Study the company
For starters, Buffett follows the Benjamin Graham school of value investing, which looks for stocks, mutual funds, and securities with low prices based on their intrinsic worth. According to this model, you need to look at companies as a whole based on fundamental factors like performance, debt, and profit margins rather than focusing on the supply and demand intricacies of the stock market.
Think long term
Only invest in something you would be perfectly happy and willing to hold if the market shuts down for 15 years. Looking at short-term opportunities in the stock market will not help your long-term goals. The idea here is to not think of investing in, say, equity mutual funds as simply buying a few shares of a company. Ask yourself if you’d be willing to purchase the whole company if you had enough money.
Go against the flow
Part of being successful is to think in unconventional ways. Avoid investing solely based on recommendations and stock tips. It might be enticing to take advantage of severe volatility in share prices and high trading volumes, but as Warren Buffett likes to say, “You can’t buy what is popular and do well.” Therefore, learn to keep away from shilled stocks.
Do your homework
Investing for the purpose of wealth creation can’t be a passive activity. You have to analyze thousands of stocks and mutual funds before choosing the right one. This way, you will know how to wait until the share is available at a reasonable bargain. Purchasing the right stock at the right amount is the key to successful investments.
If you don’t have the time to do this, it is advisable to outsource your portfolio to an expert financial planner or money manager who is capable as well as customer-centric.
Know when not to be patient
People tend to be patient with losses and impatient with profits. They’ll convince themselves of a price rise and choose to wait even though the price of a share has fallen by 80%, yet rush to book profits when shares go up even by 10%, thus keeping the loss-making shares and offloading profitable shares. Your practice should be the other way around in order to be successful in the long run.
As you’ve probably noticed, Warren Buffett is a bargain hunter. His value-investing technique has been subject to its fair share of criticism, but whether you like it or not, the proof is in the profits.
If you want to start investing with these principles in mind, the Tata Capital Moneyfy App offers several investment options to set your goals and achieve them by investing in mutual funds through a lump sum or SIP. You can start trading in the stock market by investing in top-rated funds and track your investments at the press of a button with the online mutual fund trading app.