Warren Buffett, the billionaire tycoon, is one of the most successful investors of all time, and many investors look up to him and as a model to replicate. Let’s break down the principles Buffett uses to choose stocks and apply them to your own investment strategy:
- Invest in what you know. Don’t just jump on the latest trend and invest in sectors you know nothing about – stick to brands, industries, and products you personally use, like, or know a lot about.
- Learn the basics of value investing and identify cheap stocks. Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis.
- Find businesses that will stand the test of time. Identify the companies and industries that you believe will have staying power.
- Invest in good management. Invest in assets that are well-managed, and where the shareholders are respected and valued.
- Be aggressive during tough times. While timing the market is often a dangerous idea, it’s important to take advantage of times of opportunity. “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold,” – Buffet
- Keep a long-term mindset. Growth comes with time. If you can’t see yourself holding your investment for years – don’t invest in it.
The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice.