10 Warren Buffett's financial lessons (Infographic)

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.

Source

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Difference between investment and speculation according to Benjamin Graham

Investment and speculation are two concepts widely used in the world of the stock. Often used interchangeably, although they have very different connotations from the perspective of value investing .

In this article we look at the difference between investment and speculation according to Benjamin Graham , analyze the characteristics required for a financial transaction not qualifying considered speculative and end the separation between the two.

Definition of investment and speculation by Benjamin Graham

Benjamin Graham defines investment in his book "The Intelligent Investor" as follows:

"An investment operation is one which, upon thorough analysis, promises security to principal and an adequate return"

Speculation is defined by Graham opposed to investment:

"Operations not meeting these requirements are speculative"

The 3 requirements of a non-speculative investment by Graham

• Comprehensive analysis of the company

For Graham, a comprehensive analysis is:

"The study of the facts in light of the established safety criteria"

Therefore, an inversion to be made ​​without prior analysis is speculative. The greater the depth of analysis, less investment is speculative.

• Security of our investment

According Benjamin Graham, this implies:

"Protection against losses under conditions or normal variations or reasonable"

As we see, this is a rather vague concept or subjective, so this will depend on what we consider normal. Warren Buffett is much more forceful with the requirement of investment security with its historic phrase:

"Rule No.1 is never lose money. Rule # 2 is never forget rule # 1 "

• Adequate performance

Graham considered adequate or satisfactory performance:

"Any type or quantity of performance, small it may be, that the investor is willing to accept as long as it acts with reasonable intelligence"

Again this is a subjective concept, because it depends on the investor's return objectives.

Is it possible to invest without speculating?

For Graham, any financial transaction that does not meet the requirements enumerated above are considered speculative. However, I consider it necessary to clarify the difference between investment and speculation of Benjamin Graham.

First, we must start from the fact that all investments are subject to some uncertainty, however small. As there is always the possibility of losing our investment, we can say that any investment involves speculation in varying degrees. There may be speculation without investment, but not without some speculation investment.

Although there is the economic concept of "risk-free rate" (rate of return without risk), this no longer an abstract concept nonexistent in practice. For many American bonds or German bonds are practical representations of this concept. However, it is possible (although unlikely) that these countries can not pay if it happens some totally unforeseen event, such as a war or a natural disaster.

What we try to do is minimize speculation to maximize the safety of our investments and, therefore, minimize the risk. We have three methods reduce speculation and, therefore, increase the security of our investments:

• We invest in companies easily assessed, typically those with more predictable revenues.
• Deeper analysis of companies.
• Better analyze our investments, increasing our knowledge and experience.

The combination of these three methods, along with a large dose of common sense and experience, is what has made Warren Buffett the third richest man in the world and the best investor in history. Ye may not be investing in the list of world's richest by Forbes magazine, but with a little effort will succeed a good return for your savings sleeping well at night.

Learn About the Real Estate Market and Construction

Property management is the process by which control not only purchasing processes, equipment, maintenance and use of buildings, but also the quality of these. The property manager is responsible for controlling and managing home equity properly, or that of another, so as to achieve maximum performance with the highest quality.

Today, and more after the boom that has suffered the sector, the task of property managers has become a profession essential, because the holder of more than one property, in many cases, is not able to control for management itself property documentation, thus preventing profit, so that appropriate professional uses a property manager.

If you are thinking about how to profit in something that is profitable in the long term. Have you considered lots of options but with the reality of the Latin American countries is not safe to put your money, today we show a new business proposition in the long run ... we suggest you invest in a real estate proposal.

The real estate market is becoming more globalized and the investments made ​​in it are increasingly frequent multinational capital. This will have a great opportunity as their prices become more competitive.

The crises that cross most developing countries show investment at appropriate times and this is one of them. The countries currently profitably to money are several, including notably Brazil, China, Canada, among others.

When you decide to access such proposals should be aware that prices will increase as the work progresses, that is usually a percentage increase each time through a different-launch phase, construction, completion, . These increases are also subject to the number of units, promotion and other particular aspects of the construction to be made.

Investors who are currently in business often make huge profits because one or more departments reserve prior to the start of construction. At this point the investor usually be asked to make payment of a percentage ranging between 10% and 30% of the total value of the sale during the construction period. The remaining amount shall be paid upon the work culminates and will be financed through a mortgage contract to be held with a financial institution.

The advantages obtained when choosing this type of proposals can be listed below:

 

 

1. Obtaining higher profits as a result of price increases during the making of it. The increase varied between 10 and 15 percent.

Two. Benefits are achieved between about 10 and 30 percentage points above the total price, but only have made the payment of only a portion of the investment.

Three. The payment methods differ according to the work in which you enroll.

April. The length of time that usually ranges from work last year and 2 years.

May. Almost all of the investments can be resold at any time.

No doubt there are great opportunities in real estate, one of the secrets of this business is finding out the supply and demand on the street, researching and asking about possibilities of buying, selling and construction. In future articles we will expand the topic.

How to Invest in Real Estate and Land

You want to invest money to raise their capital gains safe ... but is too conservative. We present one of the most secure that there ... real estate.

Investing in property has always been one of the lower-risk, absorbing property value inflation, one of the most significant variables in countries in crisis. It is also one that pays dividends every month with security.

At the time of placing their money in real estate or land should be considered that can not be chosen either because it may implicate a big risk, such as properties with hidden damage, insecure areas with noise pollution, etc.. On the contrary, we must conduct a study of the property to be acquired to go make sure you get the best return possible and not stall your money at a problem.

Some facts to keep in mind when choosing where to invest are:

• Area where it is located.
• Construction material used
• Neighborhood safety.
• Location and level of neighborhood schools.
• Nearness of public health service.
• Financial state of the city in which it invests to be safe from layoffs in companies.
• Housekeeping qualified to keep the place clean.
• Recreational and sports facilities close to home.

All these data to assess a property and assess economic value.

There is also other related proposal which can increase their income in a phased manner and is buying land. That is, instead of buying a house or apartment, I acquire a plot.

The purchase of land to build or speculate on its increased value over time, is a safe strategy being implemented by many companies and individuals.

 

 

On the other hand, the rent of land is profitable because there is a growing demand for food, especially those that are grown. Therefore, one of the first investment is to buy land to lease for agricultural production. With this method you will earn a regular income established.

We consider here the two possibilities we offer are safe to perform and each has its advantages and disadvantages. However, both options require an initial investment and the previous evolution to be acquired.

If you choose a home should evaluate each of the items considered. And if you choose a field, you can get a regular income, the decision is in their hands and under their own analysis of the case.