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Stock Market Secrets: Warren Buffet's investment tips every investor should know

Speed News Desk | Updated on: 13 July 2021, 1:48 IST
Warren Buffet

Billionaire Warren Buffett’s annual letter to Berkshire Hathaway shareholders in 2018 gives valuable lessons in investment and the need to remain focused while dealing in stock markets.

Warren Buffet is known to keep a big amount stashed in banks which could be invested in companies by buying the shares. He maintains that we should have ready cash when the opportunity to buy comes and people don't have the cash to buy stocks. He believes that markets are volatile and one should have cash when the market crashes as it provides ample opportunity to buy stocks at a very low price. But that is possible when you have cash and you are not already fully invested with your capital.

‘Insane to risk what you have....to obtain what you don’t need.’
Warren Buffet writes:
“Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need. We held this view 50 years ago when we each ran an investment partnership, funded by a few friends and relatives who trusted us. We also hold it today after a million or so ‘partners’ have joined us at Berkshire.”

Stock investments are not just ‘ticker symbols’
“Charlie and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker symbols to be bought or sold based on their ‘chart’ patterns, the ‘target’ prices of analysts or the opinions of media pundits. Instead, we simply believe that if the businesses of the investees are successful (as we believe most will be) our investments will be successful as well. Sometimes the payoffs to us will be modest; occasionally the cash register will ring loudly. And sometimes I will make expensive mistakes. Overall – and over time – we should get decent results. In America, equity investors have the wind at their back.”

Why investors shouldn’t use borrowed money to buy stocks
“There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.”

First published: 6 July 2021, 18:45 IST