It is not necessary to do extraordinary things to get extraordinary results.
– Warren Buffet
Investments come bundled with risks. However, as any financial adviser worth their salt will tell you, you don’t have to go to extra lengths to protect yourself. Especially if you follow basic precautions before investing.
Warren Buffet has consistently been among the richest individuals in the world thanks to his intelligence and foresight. He has not only earned millions but also made millions for a lot of people. If you want to know what leads this man to be so successful, then you need to understand his rules of investing.
Rule 1: Don’t lose money
The first rule of investing is to not lose money. Sounds simple right? Well it is simple. Don’t waste your money on trivial things or gamble it all away. Be frugal with money and don’t be casual about investing. Have a good mindset regarding your investments as you are investing your hard earned income in stocks. So make the most of it because your attitude plays an important role in the world of finance.
Rule 2: Remember rule 1
Rule 3: 50 year rule
The basic principle behind this rule is to always invest in a market which can survive at least 50 years.
For instance, if you wish to invest in the oil and gas industry and want to hold the stock for a long period of time, then having a foresight about the industry is very important. What if petrol and oil become redundant in the future with the introduction of new, greener technology? You stand to lose a lot!
The best way to go about this would be to read and stay up to date with current trends and the industry that you are planning to invest in.
Rule 4: Stability is the key
Always invest in stable companies. Check the company’s history, looking at at least 10 years of a company’s data before considering investment. Mature companies, who have a long history provide better returns as they are stable and will last for a long time.
Rule 5: Hold for the long term
Though stock markets are a very volatile place to invest with their ever changing prices, it is a bad idea to sell your shares whenever you face a loss or profit. Buffet always believes in long term holding of stocks. A small investment today can make you millions 10 years down the line.
Rule 6: Invest in shareholder friendly companies
Before investing in a company, read up on its treatment of shareholders and employees. A company which treats its employees and shareholders with good returns and various investment options is a company which indicates good stability and returns. The good management of the company will just add another perk to the investment.
To conclude, it is essential to consider different investment options and diversify your portfolio from the safest to the riskiest and from the cheapest to the more pricey investments. Have a good financial management system that can help you to manage your personal finances.