What could be better than taking some investing lessons from the one of the richest men on earth, Warren Buffet!
When it comes to gain some investing lessons in finance, none can give the best advice besides Warren Buffett. One of the richest men in the world, Warren Buffett has risen to the pinnacle of success owing to his innovative planning and creative thinking.
Below are some tips on financial investment that we can learn from the man himself.
1 Price necessarily does not have a relation with value
The money we pay for a thing does not necessarily have a relation with value. If you were to purchase a high priced bungalow, it will not really translate into a high end life style.
Warren Buffett’s investing lessons hint that when one invests in stock market, the value of stock is not really linked to value of the company itself. The sentiments prevailing in the market make a key impact on the worth of the stocks.
The key here is to invest in assets or stocks that can guarantee you long term inflation free returns. Learning how to invest will really help you learn about financing.
2 You should be loss-averse in business
Investors look out for profit from every penny they have invested. If you are to follow investing lessons from Warren Buffett, they point out that you should not run after profit from every penny you have invested.
Your focus instead should be, to averse any kind of loss that might occur. The key interest should be on preservation of the capital amount that you have invested. The key takeaway here is to focus on stocks that are from companies, which have long term potential to give you quality returns. People invest money into things when they hit retirement-age in order to maximize their income, health insurance being one such investment. See here for how the over 50s keep building their wealth.
3 Be informed on the tax deductions
Warren Buffett has remained tax savvy like other billionaires and you should be so. It will benefit you if you have knowledge on tax laws as you will be able to use them to your advantage.
The tax implications of any investment need to be understood before you make any kind of financial investment. This can be understood from a simple example. If you decide to invest in a bank that offers 9% returns, the interest would be charged as per the tax category you fall in. Higher the tax bracket, lower will be the fixed deposit return that you will get.
Therefore, it is better to understand the tax implications before you make any key investment.
4 Limit your Borrowings
You need to limit your borrowings. In this era of EMI’s, it is hard to resist the temptation to purchase costly appliances on monthly installments. However, the fact that people ignore is that any product loses its value over time and by the time you are done with clearing the principle and the interest amount, the product has outlived its value.
The takeaway here is that you need to limit your spending and borrow only when it is of utmost importance. In case, you take any loan from bank or any other financial agency, understand the entire associated fee that you might have to pay.
5 Make worthy Investments
The key to better investment is to invest in undervalued stock that has a better potential and then hold it for long enough. If you wish to buy shares of a mediocre company at a cheap point, it will harm your interests in long run. Instead, the focus should be on investing in costly shares of a big company and hold them for a shorter term. If you’re looking for a stock advisor tool to assist you in making investment decisions, read this review of the Motley Fool.
The key takeaway here is that you should invest when you have the required amount and not look for the preferred time as companies sometimes advertise.
Investing is not as tough as you think. The need of the hour is to act smart and invest like a professional. The returns will follow for sure.