Advice From Warren Buffett The King Of Money Management
Warren Buffett is a businessman, investor, and philanthropist. He is considered the most successful investor of all time. And in his book “The Intelligent Investor“, he shares advice about how to have a better understanding of the stock market.
In his own words: “I try not to look at the market too often. I find that if you do business with people you can trust, it’s much better than trying to buy from someone who always seems to be screaming ‘Sell! Sell!’ The less you know or think about what goes on in Wall Street, the better prepared you’ll be when things go wrong.
1. On Earning
Never depend on a single income, make investment to create a second source.
Investment is a necessity for a second source of income. Be it the stock market, real estate, or any other endeavor. The risks involved can be higher but the rewards are comparably greater.
2. On Spending
If you buy things you don’t need, soon you have to sell things you need.
This article is about the psychological phenomenon that when we buy things we don’t need, we soon have to sell things that we do need. The author’s argument is that it’s a result of not having enough room in our homes and closets and it’s also a result of the things we make ourselves feel.
There are many reasons why we might not be able to resist buying certain items. One reason might be the desire to change our mood. Another could be because of how expensive they are relative to other items in the store (such as clothes). Or it might even be because there is an offer or discount on these goods.
We should consider whether or not an item will actually make us happy before buying it, and then decide if there are other ways to achieve the same goal.
3. On Savings
Don’t save what is left after spending, but spend what is left after saving.
We often say that with today’s economy it is not possible to save up. The better strategy would be to spend as little as possible and then save what is left over.
However, this is a simplistic way of looking at things since people actually spend money even if they don’t need to. So, instead of saving what is left over after spending it all, we should think about saving before spending and then spending the money what remains.
4. On Taking Risk
Never test the depth of the river with both the feet.
This advice can be applied to many aspects of life, but it is a common saying in the world of finance. For example, A lot of people think that they can invest all their money on one company and make an extraordinary amount of money. But this is not a wise investment strategy because your entire investment portfolio can be at risk if that company goes bankrupt or has some other type of financial troubles. You should instead invest in multiple companies, industries, and even countries to reduce the chance for such an event to happen.
5. On Investment
Do not pull all eggs only in one basket.
There is a saying in the stock market that suggests that you should not invest all your money in a single company, industry, or area of the market. It is also known as “don’t put all your eggs in one basket”.
This strategy is most commonly applied to investing, but it can be applied to any situation where resources are finite and their allocation matters. The adage derives from an old European tale about a man moving his family from town to town, leaving baskets of his goods behind for each family member to collect on his return trip. He does this so if one town was attacked by bandits or infested with disease he would still have something left with which to start over elsewhere.
6. On Expectation
Honesty is a very expensive gift, do not expect it from cheap people.
Cheap people are not the type of people who would give you honesty. They will do anything to make a sale or get at your money. Always ask for an honest opinion if they are cheap, because chances are they will not be honest with you.
Conclusion:
Warren Buffett’s investment strategy is quite simple but it can be very effective for investors with a long-term vision.
