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9 Can’t-Miss Secrets Behind Warren Buffett’s Wealth

9 Can’t-Miss Secrets Behind Warren Buffett’s Wealth

Studying the success of investors like Warren Buffet is a cottage industry. A search for “Warren Buffet” on Amazon shows over 700 book titles. As one of the most successful investors in history, it makes sense to explore the principles and ideas he used to achieve his wealth. What characterizes Warren Buffet?

1. He Is A Dedicated Student of Investing

For investors simply looking to earn average returns, Buffet recommends investing in index funds (e.g. a popular type of index fund invests in the S&P 500 stock index). What if you want to join Buffet in seeking to very high returns, in excess of the market?

Be prepared to study and learn to follow in Buffet’s footsteps. Buffet’s study of investing goes back decades to his time as a student at Columbia when he studied with Ben Graham, author of The Intelligent Investor. Learning the details and methods of investing are the first secret of Warren Buffet’s wealth.

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2. He Stays True To His Principles Even When They Are Unpopular

Do you remember the “Dot Com” era of the late 1990s? From an investing standpoint, the Dot Com era was strange indeed. Many people bought shares in companies that had little revenue or profit. At that time, Buffet avoided these trendy investments. That decision led some to question his judgement. In 2001 BBC article, Buffet points that, “investors had been hypnotised by the staggering ascent of tech stocks and ignored everything else, including whether the businesses they were investing in were making money.”

3. He Improved His Communication Skills Through Training

In order to have money to invest, Buffet understood that he had to increase his income and professional skills. When he was in his early 20s, Buffet took the Dale Carnegie course to improve his speaking skills. To keep his skills sharp, he then took up a part time teaching role at the University of Omaha. Public speaking is a skill that most people can learn with practice and training.

4. He Reads For Hours Each Day

“I read 500 pages like this every day. That’s how knowledge builds up, like compound interest.” – Warren Buffet

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Daily reading is a key habit for Buffet as he seeks new information and opportunities. He reads far and wide: multiple newspapers each day, large numbers of financial reports on potential investments and books. For example, he reads The Wall Street Journal and Financial Times every day (his billionaire business partner Charlie Munger prefers The Economist).

Reading reports, books, newspapers and other material each and every day is much like compound interest. Over time, the knowledge he learns compounds and yields greater insights. Daily reading is a wealth secret that anyone can practice with the right discipline.

5. He Practices Value Investing Principles

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” – Warren Buffet

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There are many different investing approaches on the market: dividend investing, index fund investing, value investing, and so forth. Buffet’s approach is fundamentally based on the value investing principles developed by Ben Graham in the mid 20th century. According to Investopedia:

Value investing: The strategy of selecting stocks that trade for less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with the company’s long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated.

The great challenge lies in identifying the intrinsic value of a company and then having the courage to put your money on the line.

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6. He Builds Wealth Slowly

Unlike the technology entrepreneurs of today, Buffet earned his wealth slowly over many decades. Attempting to get rich fast is a recipe for disaster that tends to lead people to taking foolish risks.

7. He Limits Personal Indulgences

Buffet is well known for spending relatively little of his fortune. For example, he still lives in the same house in Omaha that he purchased in the 1950s. Buffet is an expert at resisting lifestyle inflation. After all, if he spent all of his fortune, there would be less available to invest.

8. He Knows His Limits

Despite the potential opportunities, Buffet has steered clear of investing in high technology companies. Why? Buffet argues that investing in innovations tends not to produce good returns. In a famous 1999 Fortune Magazine article, Buffet pointed out that the automotive industry was one of the most innovative developments of the 20th century, changing the daily life of millions of people. Yet, a very large portion of American automobile companies have disappeared – a fact that should give pause to investors. Given the difficulty of successfully investing in innovative companies, Buffet tends to avoid them.

9. He Started Earning Money As A Teenager

Growing up, Buffet was determined to earn money. When he was seventeen years old in 1947, he earned $5,000 delivering newspapers (equivalent to $52,000 in 2013 income terms according to Measuring Worth). Making money and managing money effectively are skills that take time to develop. Buffet did himself a favor by starting young

Featured photo credit: Dollars/RabidSquirrel via pixabay.com

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Bruce Harpham

Bruce Harpham is a Project Management Professional and Founder and CEO of Project Management Hacks.

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Last Updated on November 24, 2020

10 Steps To Help You Make Your First Million Dollars

10 Steps To Help You Make Your First Million Dollars

Money may not be everything, but the things it could afford makes certain things so much easier. While it can’t afford true love, kindness, passion and wisdom, certain processes becomes much more efficient. A million dollar today compared to a million dollar ages ago is indeed a lot different in terms of value. At the present, it is more possible to make your first million if you really want it. Especially, there are many ways the world can offer to help you make your first million dollars.

Believe you are capable, and you’ll get there. Here are 10 ways to ensure you will reach that goal:

1. Stop planning, start doing

“If you wait, all that happens is that you get older!” – Mario Andretti

The first step is sometimes the most challenging step. If you want to get ahead, you should know not only where to go but also when you are going to perform your first move. Planning alone won’t make you succeed. Too much preparation won’t get your things done. So start doing and remain focused on the goal you’ve set. For example, if you want to earn more money through your current job, seek to have a promotion within the organization or find a company that will help you increase your salary. It’s always about starting to take upon yourself the beliefs and habits of highly successful people.

2. Define your priorities

It’s not enough to simply become busy, give most of your attention to what matters the most and what is important to you. Make sure these priorities you create will continue to support your goal. For example, you want to own a brand new car. What exact amount do you need to feel accomplished? What are your ways and means to make it? These are the questions you probably need to ask so you can begin constructing your priorities list. Let’s say, less spending on home furniture can give you more saving that can accumulate until you achieve your dream car.

3. Track your gains and losses

Sometimes you need to take a look back and see the big picture to realize what you have and where you are today. Tracking your gains and losses means monitoring your past activities to come up with a conclusion regarding your progress. Based on your conclusion, you can decide what you should do next.

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4. Make an investment

Invest in something that will accumulate wealth. Invest in assets and avoid too much liabilities. Investment is like watching your plants grow. How much you keep matters more than how much you spend. Make saving a habit. Save while you can.

5. Be patient

No successful person will think he can make tons of money overnight. Many have found themselves in debt because of too much living in the now. While there are many people as well who really get their patience paid off. Patience works to most people. Being patient doesn’t mean waiting while doing nothing. Remember: no aspiring millionaire is a couch potato.

6. Work with what you have and make the most out of it

Instead of thinking about what you lack, focus on what you have and what amazing things you can do with it. Spend your time and energy wisely.

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7. Expand your knowledge

“True knowledge exists in knowing that you know nothing.” – Socrates

There are several exciting ways to improve your knowledge and perspective about what’s new in your field, it’s endless. It is important so you don’t get stuck to one thing. Have courage to push that goal, you have to keep moving, you have to get deep.

8. Establish routine

Be careful with your actions, you become what you do. Begin each morning with a clear mind and definite plans. Stick faithfully to your routine and finish what you’ve started.

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9. Adapt and develop

You can only do better once you begin to recognize what you need to improve. Change is the only constant thing. Adapt new ways and new strategies to develop more effective results. The value of money is never stable, it changes over time. You have to keep an eye to those changes.

10. Focus on your goal

Keep a clear and determined mind constantly to avoid distractions that drain your energy and mislead you. Know your target and your purpose of getting there. Remind yourself everyday to attract favorable things.

Featured photo credit: Giuliano Maiolini via flic.kr

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