The following graphics display 10 financial lessons we can learn from Warren Buffett . These tips cover various topics such as personal finance (spend wisely), psychology (than your fear of risk) or stock market investment (selling loser stocks when the market goes up, you buy stock winners in the cracks).
10 financial lessons to learn from Warren Buffett
10 Warren Buffett's financial lessons
Warren Buffet Lesson No. 1: Spend wisely
- Buffett still lives at home with 5 rooms he bought 55 years ago.
- The money invested can get an annual return exceeding 20%.
- The median household income was $ 45,800 in 2010 for. Average spending on frivolous purchases was $ 6,870 or 15%, enough to fill the tank of a Hummer 7 times a week for a year.
Warren Buffet Lesson # 2: No one cares about your money more than you
- Buffett takes all decisions in their own interest, not like some brokers who make decisions in their interest to earn commissions.
- More than 1 in 3 Americans has a financial advisor. The 45% have no financial plans. 5% has no objectives or strategies.
Warren Buffet Lesson # 3: Do your homework, analyzed thousands of shares
Buffett spends 18 hours a day analyzing how to invest their capital,
and says investors should think like owners of part of the business.
"Never invest in a business you can not understand" (Warren Buffett)
- The 40% of Americans say they understand finances.
- 1 in 3 can not correctly answer the following question:
$ 100 in a savings account with an annual interest rate of 2%. After 5 years, how much money you have?
- a) Over $ 102 (correct answer)
- b) Exactly $ 102
- c) Less than $ 102
Warren Buffet Lesson 4: Overcome your fear of risk
Americans are afraid to invest cause them losses, but Buffett says
stocks are more profitable than bonds, banks and even gold and are also
more secure.
"Risk comes from not knowing what you're doing" (Warren Buffett)
- The 29% of Americans are too risk averse to invest in stocks.
- The 52% of those under 31 feel the same.
- However, the last 90 years stocks have had an average annual return of 10%.
Warren Buffet Lesson 5: Focus on the long term
Leave out the savings / investment means that you will have to save more in less time to get the same result.
Buffett equated life snowballs; thinking the same investment:
"The important thing is finding wet snow and a hill rather long" (Warren Buffett)Saver 1:
- Start saving at age 21
- Save $ 500 per month to 30 years (9 years)
- Get an annual return of 7%.
- Reaches $ 1 million to 65 years.
Saver 2:
- Start saving with 31 years
- Save $ 500 per month to 65 years (34 years)
- Get an annual return of 7%.
- Reaches $ 1 million to 65 years, having to spend $ 150,000 more for more years.
Warren Buffet Lesson 6: Invest in quality business
The result of doing your homework is to find valuable companies. Buffett is famous for having invested in Coca-Cola, Wells Fargo and IBM.
"An investor needs to buy shares as if he were buying the whole company on the street" (Warren Buffett)Average lifetime of a company in the Fortune 500:
- 60s: 75 years
- Now: 15 years
Warren Buffet Lesson 7: Looking for exceptional bargains solid companies
- Buffett recommends buying shares for a crack, when even great companies trading at extremely low prices.
- Analyzes performance, business mission, business processes, long-term goals and more.
- Invest in a few companies can be better. Therefore, more time during further analysis rather than more companies.
Warren Buffet Lesson 8: Take investment decisions Based on how the team manages money manager
Buffett believes that austerity is indicative of a mindset profitable. Once bought a company whose owner took the time to discover that the paper roll had 500 sheets announced.
You should assess the following:
- Return on equity ("return on equity" or "ROE"): The company's net profit divided by equity.
- Return on capital employed ("return on equity employed" or "ROCE"): The company's EBIT divided by total assets less its liabilities.
Ideal condition: ROE and ROCE are equal.
The 40% of Americans have made financial decisions based solely on emotion. Approximately 1 in 2 men and 1 in 3 women.
Warren Buffet Lesson 9: Be patient, wait until everything is in your favor
When conditions are aligned, purchase an appropriate amount of shares. Buffett recommended actions between 10 and 15 companies.
In bad times, wait. A quality company should recover and do not want to regret selling prematurely.
"I think the worst decision you can make in stocks is to buy or sell Based on the headlines of the moment" (Warren Buffett)
- The biggest financial regret of millionaires: Bad decisions over shares (10% regret it)
- The 57% of Americans in a state of retirement has financial regrets.
Warren Buffet Lesson # 10: Sell losing stocks when the market goes up, you buy stock winners in the cracks
Sell a failed action at its worst is added to your losses and buy a great company at high prices cut your benefits.
"The beauty of the shares is sometimes sold at ludicrous prices. This is how Charlie Munger and I became rich "(Warren Buffett)
The 25% of Americans follow the ups and downs of the stock at least
once a week, but 17% believe that the market is too complicated and 11%
do not even know where to start.
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