Warren Buffett – One of the most successful investor of all times with an estimated net worth of over 80 billion dollars to this date has shared his methods for investing. Having bought his first stock at 11 years of age and having $53,000 dollars to his name at 17, he sure knows a thing or two about this market. And even though he spent a lifetime developing his skills, he’s has shared some very straightforward advice about investing that anyone can take advantage of. So in this video I’ll show you how you can invest your money safely and become filthy rich.
Warren Buffett’s first rule is to simply think long term over short term. He might be going overboard with this concept and he is truly embracing it around his entire life. He still lives in the same house he bought in 1958 and is also working at the very same desk since 50 years back and doesn’t use a computer but traditional pen and paper. Why google when you can just open an outdated encyclopedia book and spend 40 minutes maybe finding what you look for eh? When it comes to computers he’s only sent one email in life and tell you to who in the end of the vid. Nah here you go it was sent to Jeff Raikes of Microsoft. And Warren Buffett is still rocking the good ol Nokia phone and to be fair that thing last longer than the 4 iPhones I’ve had in my life. He’s been quoted saying he doesn’t throw anything away until he’s had it for at least 20-25 years. So thinking long term is natural for him and the ability to resist selling has proved to be very successful for him.
So having that said the reason why he’s holding on to what he buys is because he does his homework and does so very well. He’s stated many times that he spends 80 % of his day reading and catching up with the latest news and what companies to invest in. He thinks about life and investing as learning as much as he can and reads between 600-1,000 pages every single day. So before he makes an investment he makes sure he knows the ins and outs and has a deep understanding of even the smallest details of the operations in a business he want’s to invest in. He tends to invest in huge companies that he thinks has the ability to live and strive for a long time.
He makes the metaphor that Investing is a lot like baseball and instead of swinging at every ball that’s coming his way, he waits for just the right pitch. He’s got the patience to watch pitch after pitch go by, until just the right one comes his way. Even when people are screaming to swing he remains calm and have trust in himself and only swings at the pitches that’s in his area. When he’s done his research and an opportunity comes along to invest in that’s in his area of expertise, that’s when he goes for the home run and hits big.
However not many people have the time or money to read for 8 hours a day and invest a few billions in the biggest companies like Warren Buffet, and it’s not a strategy that anyone can apply and find success with. And I wanted to make a video explaining how absolutely anyone can invest and become rich without taking time to read and grasp what to invest in which is why I’m super excited to share this with you. So when reading the Berkshire Hathaway Annual report of 2013, one of the most interesting paragraphs I found was on page 20 where he gave a very simple and straightforward advice about investing.
He says “My money is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will.”
So in his will he’s demanded that future of his family’s money should be invested such as this:
“Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.)”
And he finishes it off by stating
“I believe the trust’s long-term results from this policy will be superior to those attained by most investors”
I told you it was straight forward! Don’t try to outplay the market but instead play with it. No man or machine can predict the ups and downs of the market, well except for Warren Buffett, so it would be foolish to try to beat it when you can simply join it.
The very same formula was also mentioned in Tony Robbins book money master the game and index funds really seems to be the future of investments because the market will always rise in long term, and that’s essentially what you invest in – the market. The S&P 500 contains all the 500 largest companies that trade on NYSE and Nasdaq. Instead of picking stocks individually, you can now own a piece of all of the biggest companies such as Apple, Microsoft and Google.
Like I discussed earlier Warren Buffett is an expert in picking the best companies out of these 500 and invests huge amounts in them, but this will save you time and you have a very secure investment that can bring great returns over time. And investing in an index fund is very secure since a single company might go bankrupt, however the market will not. And you don’t have to stick to only the U.S market but could invest in the european and asian markets that’s also doing very well and you can even invest in global index funds to own a part of the biggest companies in the world.
And for the other 10 %, the short-term government bonds is a very low risk low cost alternative that is also offered by vanguard amongst others. Short-term bonds are very attractive to investors because of they’re very stable and consistently rising, however the return tends to be smaller.
I’ve taken a very similar but slightly more aggressive approach to investing as Warren Buffett is suggesting and have had great results with it. Click here to read the Berkshire Hathaway Annual report, it’s a great one.
And I’ll finish this off through Warren Buffett’s words: “The goal of the non-professional should not be to pick winners but should rather be to own a cross-section of businesses that in aggregate are bound to do well.”