When it comes to investing in the stock market, there is one name that is a big source of inspiration for every investor, it is none other than Mr. Warren Buffet. He is by far the most successful investor in the world and among the top richest people in the world. He is a pure source of admiration for many. Over the years he delivered the most panacea lessons to thrive in the stock market.
In this article, You will know the 7 timeless financial lessons from Warren Buffet with his priceless quotes that can add value to your wealth too if you follow diligently.
Lesson #1 –
You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with a 130 IQ.
Generally, People have this notion that finance and investment require a lot of knowledge, you need to have MBA in finance or a CFA, and so on, also it is not a cup of tea for a normal person. But Warren Buffet says that investment is not rocket science and there is no guarantee that a guy with a higher IQ would beat or certainly earn higher or always earn. The problem is that basic finance and money management is not a part of the school curriculum, nobody really teaches it hence it looks very difficult but all you need is some common sense to pick a good stock for investment.
Lesson #2 –
In business, I look for economic castles protected by the unbreachable moats’.
During the 17th and 18th centuries, kings would have castles and surround them with moats full of water so that enemies can’t breach them.
That is exactly what Warren Buffet looks for in the business, Thick moats that competitors can’t breach, Here moats represent the competitive advantage. So he likes to invest in companies that have a strong competitive advantage.
For example, look at Coca-Cola, it is the most popular soft-drink company in the world and created such a strong brand name, along with that it also has a very loyal customer base that only drinks coke, apart from brand Coca-Cola has the biggest distribution network presents all over the world, and of course, it has a secret formula that is hard to replicate.
Besides this, Warren Buffet invested in Apple in 2016 with an amount of $36 billion, which is worth around $160 billion today.
Lesson #3 –
Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.
It is no secret that one of the biggest reasons success of Warren buffet is reading. He used to read 500 pages a day, he says I read and think and that makes less impulsive decisions than most people in the business and that is very uncommon in American business.
A lot of investors panic when the stock falls 40 to 50 percent because the majority of them invest based on the tips, they don’t read about the business of the company the quality share fall rather than buying at discount retail investors end up selling the out of fear because of a lack of information about the business.
Lesson #4 –
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
This quote of him is about the human emotion of fear and greed.
He says that we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. This is probably one quote that the majority of you would have heard before but trust me it is very difficult to implement this quote in the real world, it is because we humans are risk-averse. So we tend to follow the crowd so what happened is that when there is a bull market, everyone is investing in the stocks and that makes us greedy, we also end up investing with the crowd, but when there is a correction everyone panics and we end up selling stocks out of panic whereas Warren Buffet does the exact opposite, he buys when everyone is selling and doesn’t get greedy during the bull run.
For example, During the 2008 financial crisis, Goldman Sachs was almost on the verge of bankruptcy and everyone was selling the stocks, its share price tang more than 70%, and at that time Warren Buffett invested almost $5 billion in Goldman Sachs, although he got the preferential shares as he had the bargaining power but that investment resulted in huge profit for him.
Lesson #5 –
Successful investing takes time, discipline, and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.
Warren Buffet’s journey is a classic example of discipline and patience, Today he has worth $125 billion and is among the top 5 richest people in the world but you would be surprised to know that he became a billionaire at the age of 55, so it took him 33 years to became a billionaire and that happened due to investment with discipline and patience.
Unfortunately, today peoples want to double their wealth in 3 months or 6 months because they lack patience. They don’t really understand the power of compounding.
Lesson #6 –
The 3 most important words in investing are margin in society.
That means to buy stuff on sale pay less than what it’s worth, he used to be a value investor in his life and always looked at stocks that are available at discount to their fair value. Here margin of safety basically means buying stocks at a discount to their actual value.
I never attempt to make money on the stock market. I buy on the assumption that they would close the market the next day and not reopen it for five years.”
His lesson is simple: if you can’t own the stock for 10 years, don’t even think about owning it for 10 minutes.