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Summary
- Being greedy when others are fearful allows an investor to make purchases at a dirt-cheap price.
- An investor should always have a long-term view for his investments.
- Investors should think like an owner and do all due diligence of the business and not just for the price of its share.
When Warren Buffet, arguably the best investor in the world, speaks, the entire investment community listens. From the big shots on the street to small retail investors, his advice is taken as a golden nugget in the investment community.
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He is a value investor, but his words of wisdom are not limited to value investing but spread far deeper inside the world of investment. With that being said, let us have a look at three tips from the “Oracle of Omaha” that have stood the test of time and could possibly change anyone’s investing journey for good.
- Be Fearful when others are greedy
One of the most renowned quotes of Warren Buffet is “Be fearful when others are greedy and be greedy when others are fearful”. The quote explains the importance of going against the crowd in the world of investing. The best investments are made when an investor strikes a bargain.
When there is too much blood on the street and everyone is selling their shares at a dirt-cheap price due to panic (like the one in March 2020) is the right time to get in and become greedy to buy those shares. On the contrary, when everyone is becoming greedy and starts to purchase shares at exorbitant prices, it is the right time to become fearful and exit the holdings.
Read More: 3 Stocks Warren Buffett recently bought
- Buy and Hold
Warren Buffet is a proponent of buy and hold strategy instead of switching between different investments. In fact, he said his preferred time horizon for a stock holding is “forever”, in an interview. He says buy stocks that you don’t regret holding if the stock exchange closes for ten years.
To put it simply, having a long term view for investments is absolutely crucial to an investors’ success. The short-term trading of the price swings is an entirely different ball game and should be left up to the traders and speculators to play.
- Think like an owner
When an individual owns a company's share, he instantly becomes a part-owner of that firm. One big mistake investors do is they only think from a price perspective and forget about the underlying business. This mentality should change and investors should start to think like an owner of the business while purchasing its shares.
An owner looks at all the aspects of a business such as the valuations, product quality, competitive strength of the company, regulatory environment etc. On the other hand, a trader is only concerned with the price trends, and therefore the holding period is relatively small (as per the trend).
