Investment Advice from Warren Buffett

Kimberly Watson, Editor in Chief
July 19, 2012 /

Since an early age, Warren Buffet has been involved in finance in its various forms and has been established as a foremost advisor with a proven success philosophy. During the course of time, this remarkable man has offered much advice and financial learning, relating to tips for investing.

The foundation of his philosophy has been that cash can open many doors to opportunities. To prove this, he has always retained immediately available cash, for unprecedented losses, or quickly seized acquisitions or investment opportunities. This could be related to guidance from his grandfather, contained in a letter to him in 1939.

An example of the wisdom of this and a tip for investing is that any one with available cash to invest at the start of the financial crisis could buy low and could have sold high with substantial financial gains. Alternatively, if assets had been tied by investments, then the result would have been significant losses.

A further tip for investing is directly related to our stock market and investing system is that stocks should be avoided if everybody is buying them, as they are probably over valued. Seek stocks that are neglected, check their fundamentals and if viable, invest.

Companies that pay regular dividends are a preferred option. Popular trackers of these stock types are dividend aristocrats. Theses are companies that have increased their dividends during the past twenty five years. Mr. Buffett recently announced that the total sum of dividends received by him from Coca Cola will shortly surpass the sum he paid for the stock initially.

Warren Buffett is a significant value investor. He looks to buy undervalued stocks with a base on their intrinsic value. Viewing the company’s fundamentals, he assesses the intrinsic value over a minimum period of five years or longer. After considering return on equity, operating margins, and having little or no debt, he draws a comparison of the company to its peer group, regarding whether it is undervalued.

Another tip for investing from Warren Buffett is that he holds his positions for a long period of time. In fact, he has been quoted as saying that he likes to “buy and hold forever”. This is the truth, as he has owned many of his positions for over twenty years, which is highly significant in the world of investment. However, this does not mean holding a company if the fundamentals change.

Patience is also one of the tips for investing. Mr. Buffett believes that you do not trade, but invest. Find preferred companies and wait for the right price and opportunity. The last time Warren Buffet bought significantly, was during the Great Recession, when stock prices tanked. He scooped deals with prices that made him great returns in the years following.

 

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