6 Investing Lessons from the Richest Man in the World- Warren Buffett
Author yuvamind
Warren Edward Buffett is an American business magnate, investor and philanthropist. He is the most successful investor in the world.
Warren Buffet, also known as the prophet of Omaha, is no stranger to the world of investing. There’s a lot to learn from the most successful man in the world of investing.
Here are some lessons from Warren Buffett that you can use to invest better.
- If you buy things you don ' t need, you will soon sell things you need.”
You can make more money not only by investing or taking up a second job, but also by resisting the temptation to go out and just splurge. As the saying goes – a penny saved is a penny earned.
- “Price is what you pay. Value is what you get.”
Most of us know this- the money we pay for something and the value we get out of it, most of the time, does not have a correlation. You could possibly buy a posh apartment for 1 crore rupees. But staying in the apartment does not guarantee a high quality of life- does it?
- “It ' s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Warren Buffet recommends investing in undervalued stock with great potential and holding on to them forever. In-line with this, buying shares of a wonderful company at a fair price is much better than buying a mediocre company at a cheap/bargain price.
A buffet note that over the long term, mediocre companies gives much lesser returns compared to wonderful companies, so much so that the bargain price for which you bought the mediocre company stock does not seem like a bargain anymore.
- Be loss-averse: Majority of investor’s measure performance solely based on return. Buffett advices that you should not strive to make every dollar a potential profit which involves too much risk. Instead you should be loss-averse. Preserving your capital should be your top goal. By avoiding losses you’ll naturally be inclined towards investments with assured returns.
- Be tax savvy
Be knowledgeable about tax laws and use them to your advantage. Before you invest, make sure you understand the tax implications of your investment.
While investing in Bank FDs might give you 9% returns, the interest is actually taxable as per your tax-bracket. The real return, if you are in the 30% tax-bracket, will fall to just a little above 6%. Now, that’s below inflation rate and you are effectively losing money the longer you invest in it.
- Limit what you borrow
With daily offers from ecommerce companies, it might be tempting to buy that latest mobile phone on an EM. Considering the fact that the phone you bought for EMI and it loses its value over time, it is best if you limit your borrowing.