Best way to invest your money by Warren Buffet

When Warren Buffet was asked about the best investment advice he could give, his response was “when a person with money meets a person with experience, the one with experience ends up with the money and the one with money leaves with experience.”

He said that “The key to being an accomplished investor is an experience”. Who can be a better example than Warren himself? Here are some of the tips he shared to be a prosperous investor

Diversification: Many investors believe in diversification, but Warren Buffet doesn’t. Generally, investors invest in many stocks at a time because they are afraid that if they put all their money in one stock, the price goes down and they will lose money. It goes with the saying “don’t put all your eggs in one basket.” But, they don’t realize it will become more difficult to track each of the events happening for all the companies they invest in. If you invest in one company, you can keep up with all the good and bad news. If you invest in six or seven, it could become a huge ordeal each day. Therefore, by going with diversification, they may reduce volatility, but it might be hard to focus on all the stocks they invest in.

Buffet says investors should have trust in the stocks they invest in and hold on for long-term investments. If you don’t trust in a company and their ability to make money, why would you invest your money into them?

Trust yourself: Buffet says to be a successful investor, you need to trust yourself. Remove the feeling from your mind that others might be right and you are wrong. Never think that your decisions might go wrong. Instead, just trust in yourself to be a successful investor. If you do not have trust in yourself, you will find yourself second-guessing every move you make with the stock market or even everyday decisions.

One day trading: Don’t be an investor who buys stock in the morning and sells it the next day. According to Buffet, you should buy a stock and forget about it. He says that investors should have the mentality of buying stocks and holding onto them for decades. If you buy a stock when its price has reduced and you sell it when it just goes beyond the normal price, you make a minimal profit. When you acquire stock from a good business and hold on to it for a longer time, you make a much higher profit.

He says if you persistently buy and sell stocks, whatever little profit you make will be lost in terms of trading commissions and taxes. So, believe in long-term investment.

Learn from your mistakes: Did you expect Buffet to have never made a mistake? If you did, it’s definitely not true. He made big mistakes at the beginning, but he learned from his mistakes and moved on to become a smart, successful investor. He says you should keep a record of the mistakes you make in your life and never try to repeat them. Even for the younger generation, you should share the mistakes you did so that when you get older, you can remember what lost your money and grow from it.