Warren Buffett is a legendary investor and billionaire who is greatly admired in the United States and throughout the world. Not surprisingly, his experience and business principles have inspired a number of billionaires, investors, and CEOs from a number of companies in the United States and even in the world.
For example, like Marc Andreessen, he is a venture capitalist and Silicon Valley technology legend. No wonder because Warren Buffett’s business is also diverse, for example being an investor in various giant companies.
His investment strategy requires investors not only to explore the latest news, but also to focus on the company’s fundamentals when deciding where to allocate their funds.
Warren Buffett’s Basic Investing Principles
Here are a number of investment principles that are owned by the 5th richest man in the world, including:
1. Know What You Want To Invest
Avoid investing in businesses you don’t understand. Warren Buffett says, if an investor should stick to what they know. When he wants to invest he only buys shares in a business that he understands and how the business will make money in the future.
This is evidenced by the portfolio of shares owned such as Apple, American Express and Coca-Cola, these three companies are proven to continue to grow and generate profits for shareholders.
According to him, most investors are usually trapped in the profits of initial offering shares. Then release the shares because they hold on to investment profits.
He suggested that investors summarize businesses that have the opportunity to continue to grow in the future, have a certain market or are needed by many people and then collect their shares. Examples include drinking water companies, technology stocks to luxury fashion brands.
2. Selling and Buying Quality Stocks
Another basic principle of Warren Buffett ‘s investment is to sell and buy quality stocks. He said it is better to buy a good company at a reasonable price, compared to a standard company, but has an expensive price.
Investors must understand well what the company is doing and know the amount of money that must be paid to own the shares. His initial investment strategy was to buy stocks at very low prices.
The quality of the stock is not so important if the price is cheap, so he believes he can still make money. However, his focus changed, and he ended up buying strong and competitive stocks.
By their nature, such companies are less common and are generally more valued. He believes that after finding a good company, active investors should invest large sums of money.
Although it takes time, investors must believe that the company whose shares are collected will be able to collect income in the coming years.
3. Long Term
Warren Buffett also says, if you don’t think about owning a stock for 10 years, don’t think about owning it for 10 minutes. With so many fast news every day, there is a tendency for investors to have to react to everything.
But he did not agree with this. He thought that indolence was the key to increasing wealth. This is what makes him think, his favorite hold period is the long term.
Although occasionally selling shares, he never relinquished all of his holdings. For example, when he first invested in Coca-Cola in the 1980s, he still holds the stock. As Warren Buffett has explained before, you have to know what you are investing in.