Over the years, billionaire Warren Buffett has earned the reputation of being one of the greatest investors to ever walk this earth.
As of this December, the 89-year-old is estimated to be worth $88.9 billion, effectively placing him at fourth among the world’s richest individuals.
It Started Early
From as early as when Buffett was seven, he displayed an interest in the business. When he was in his sophomore high school year, the young man and a friend spent $25 on a pinball machine, strategically placing it in the area’s local barbershop.
In just a few successful months, they owned several machines, and their profitable business was gaining traction. It wasn’t even a year before an established businessman approached them, and the two budding entrepreneurs sold their business for $1,200.
By the time Buffett was graduating high school, he already knew that he would go on to slaughter the stock market. So enthusiastic was he that he wanted to skip college and get straight into business, a move that his father couldn’t see eye to eye with.
As such, Buffett went on to join Penn’s Wharton School but later transferred to Nebraska. After graduating with his BSc. in Business Administration, he joined Columbia Business School for his MSc. in Economics.
Needless to say, the man’s entire career history would have us here all day. Fast forward to the present and Warren Buffett is now CEO and chairman of Berkshire Hathaway, a multinational conglomerate holding assets worth over $707 billion.
Given his success thus far, the magnate must be glad that his dad forced him into college, don’t you think?
With no need to second guess this insanely successful businessman, any investment tip Buffett gives has got to be sound advice. His reputation precedes him, and his exploits confirm his status. The CEO has been in the game for so long that he would trade in his sleep.
For your 2020 investments to be fruitful, it is paramount that you follow some of his investment principles, the first one of which is that before creating an investment portfolio, create a circle of competence first.
As he always puts it, an investor should have the ability to evaluate a number of selected businesses, making the correct evaluation while at it. You did notice that he says “selected businesses,” right?
And whenever he offers this piece of advice, he makes sure that his audience notices it too. According to the CEO, you are not expected to know everything about each and every company out there.
Instead, pick a few that you are interested in, then know everything there is to know about them. This, as you may have already guessed, is what Warren Buffett calls a person’s circle of competence.
Moving on, the magnate says that your investment ideas should be simple. By simple, he means that you can explain the entire concept in one paragraph. Thanks to his many years of experience, he has determined that simple ideas tend to have the best outcomes.
After evaluating your companies of interest and generated an investment strategy that is simple enough, Buffett urges you to not jump right in. In the stock market, timing is everything – be patient enough to wait for the perfect opportunity and when it finally comes, don’t waste it.