Learn From the Best: Warren Buffett’s Timeless Investment Strategies

Any investor in their right mind would be thrilled to learn from the most successful investor of all-time.

Warren Buffett’s’ track record speaks for itself. Being worth nearly $82 billion, he is currently the fourth richest person in the world.

So how does someone create that massive amount of wealth? Through smart investments and a belief in yourself.

If you would like to learn from the best, keep reading to discover the Warren Buffett strategies that have made him such a successful investor over the years.

1. Diversify Your Portfolio

This may sound sort of like a broken record, but diversification is critical to long term success in the stock market.

Warren Buffett, on numerous occasions, has recommended that average investors or those without extensive experience invest in index funds to help them grow their portfolios. Index funds are designed to track the performance of a group of underlying stocks.

Diversifying will help when one or more stocks are declining; the others can help make up the difference and minimize losses.

Warren Buffett has specifically mentioned the S&P 500 as a low-cost index option.

Warren’s biggest holdings at Berkshire Hathaway include:

  • Apple

  • Coca-Cola

  • Bank of America

  • Kraft Heinz

  • And American Express

These companies are well diversified, being in different industries that have experienced immense growth.

However, if you have outstanding debt, its best to get that under control before investing your money in other places. If you are having a hard time paying off debt, consider debt consolidation alternatives.

2. Ignore the Noise

Like many other successful investors, tuning out the “noise” is part of the process. Noise can come from anywhere – the news, social media, friends, co-workers, etc.

Many of the stock “guru’s” that appear on TV had a successful investment that created their reputation. The problem is that many of them got lucky and was in the right place at the right time – not making them someone individuals should listen to for investment advice.

The best thing to do is to ignore the noise and stick to your plan. Getting caught up in the day to day news headlines can be one of the worst investment mistakes you make.

Listening to others will only get you caught up in a vicious cycle of cat and mouse – chasing to buy into stocks only to realize the gurus are unloading their shares on you, leaving you with a heavy bag.

3. Stick to a Long Term Plan

Sticking to a long term plan is one of Warren Buffett’s most prominent investment strategies. He says it time and time again – invest for the long term.

Many investors got burned this past march when the stock market had one of its worst days in history. They didn’t get burned by the stock market dropping. They got burned by pulling out or selling off their positions.

Now, those investors are left chasing higher prices because the stock market is hitting all-time highs.

This is an excellent example of how having a long term view in the stock market can work out in your favor.

Another thing that trips investors up in the stock market is trying to pick the stock that is going “to the moon” within a few days. The reality is that nobody knows where a stock is going in the short term, and you will be left very disappointed when the company turns out to be a dud.

Having a long term investing plan involves extensive research into the companies you plan on investing in.

One way he recommends developing a long term view is by thinking of yourself as buying a particular business instead of just buying a stock. Having this mentality will force you to consider all the scenarios that can happen.

Buying a Farm

In 1986 Warren bought a 400-acre farm for $280,000 after admitting he had no knowledge of running one. Fast forward to the present day, and the farm is now worth at least five times as much and has tripled its earnings.

Warren Buffett has referenced how buying stocks is like buying a farm on multiple occasions. The way he explains it is you wouldn’t buy a farm because you expect plentiful crops the next year. You would buy it expecting returns over the next 10, 20, 30 years.

He also mentioned if you had a neighboring farmer who every day shouted out a price to either buy his farm or sell yours – it should work to your advantage. If the price they yell out is low enough, you can purchase the farm. If it is high enough, you can sell or continue farming.

4. Keep the Costs Down

An investment tip anyone could benefit from is to minimize the costs associated with your investments. These costs could be from:

  • Taxes

  • Fees

  • Commissions

Part of the reason Buffett recommends buying into index funds is because of the lost cost fees associated with them. They don’t have the expenses that you would incur with many types of businesses.

Another thing to keep an eye out for is commissions. Although many brokerages have now introduced commission-free stock trades, there are still many brokers who charge a fee every time a stock is bought or sold. These fees can add up and take a large chunk of your earnings at the end of the year.

5. Invest in Yourself

Above all else, Warren Buffett’s number one piece of advice is to invest in yourself. By investing in yourself, you can focus on conquering your weaknesses and building new skills that will help you in the long term.

He also recommends reading books as often as possible. Similar to how compound interest works in the stock market, reading books can help you build knowledge over time.

Learning knowledge from books can give you excellent insights and can also allow you to think from different perspectives.

Interested in Learning More About Warren Buffett’s Strategies?

Investing in the stock market can reward you tremendously over the years if you are smart about your investments. Learning about these Warren Buffett strategies can help you get started generating returns.

To learn more about investment strategies, check out the rest of our blog!