3 tips from Warren Buffett that shaped my investment strategy | The Motley Fool
There’s a reason I admire Warren Buffett, and it’s not just because he managed to amass a billion-dollar fortune. One of the things that has always impressed me about Buffett is how generous he is with his advice.
From giving job-search advice to new college grads to allaying people’s fears during a stock market crash, Buffett never seems to run out of words of wisdom. And over the years, I’ve followed many of his advice as I built my portfolio. Here are some specific tips that have served me well and are worth paying attention to.
1. Look for quality, not a bargain
Some stocks trade at a high price, so much so that in the past I hesitated to buy them. But one thing Buffett has always said is that it’s important to focus on quality over price.
You might have the option of buying shares of a given tech company at $200 each while another company’s shares are trading at $500 each. But the $200 stock isn’t necessarily the best deal. So it’s best to focus on the companies you’re buying from rather than the prices they’re trading at.
Incidentally, many brokerages nowadays allow you to buy stocks on a fractional basis. So if you’re hesitant to spend a lot on a single action, you don’t have to.
2. Keep stocks for a long time
Buffett said if you don’t want to own a stock for 10 years, you shouldn’t even own it for 10 minutes. And that’s advice I’ve followed since I started buying stocks.
Some people think they can make a fortune in the stock market by buying low and selling as quickly as possible. But I firmly believe that the best approach is to load up on quality investments and hold them for many years so they can appreciate in value.
3. Don’t fall victim to peer pressure
Years ago, meme stocks didn’t exist. Now, online influencers have the ability to drive stock prices up or down.
But at the end of the day, meme stocks are a risky bet, not least because the companies behind them are often flimsy and unreliable. And so rather than buying meme stocks because they’re hot, it’s better to focus on quality companies that are likely to stay strong for years.
The same is true with cryptography. Many people have invested in digital currencies over the past few years. But if you’re not comfortable doing so because you think cryptocurrency is too speculative, put your money elsewhere. (Incidentally, Buffett is not a fan of crypto. At all.)
Learn from one of the greatest
It’s easy to look at someone like Warren Buffett and be jealous of his success. But the reality is that while he doesn’t write checks to individual investors, he’s more than happy to share some of his secrets in hopes of helping others achieve their financial goals. And so, whether you’re new to investing or have been in it for years, it’s worth keeping these points in mind when building your portfolio.
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