Many traders call Warren Buffett the stock fortune teller as they wait and anticipate where his investment will go, as he is already considered a compass for investors worldwide.
Now the 90-year-old chairman of Berkshire Hathaway with a fortune of about $76 billion and the seventh wealthiest person in the world, in this article, we will highlight the five essential investment tips for individual traders from Warren Buffett.
- The first piece of advice from Warren Buffett is to be afraid when others are greedy and be greedy when others are afraid.
It is considered one of Buffett’s most famous phrases and can be applied in the stock market and investment. This advice means that the investor should avoid buying the shares that everyone goes to, as they are It is likely to be overpriced, so Buffett advises investors to look for stocks that few people are interested in, check them out and invest in them if they are sound financially and technically.
- We move on to the second advice from Warren Buffett to investors, which is saving. Warren Buffett is known to save a lot of money for two reasons: to bear potential losses and to seize acquisition and investment opportunities.
Therefore, it is essential, according to Buffett’s advice, that the person has an emergency fund because saving is your defensive weapon. In times of crisis, in addition to this saved money, it can be used to buy shares when their price drops, and therefore this means reaping large profits when their price rises again.
- The third advice is to focus on buying shares of companies that pay dividends because it reflects that the company’s financial position is in good condition to pay its obligations and is also profitable.
And Buffett would very much prefer to invest in these companies, especially those that pay dividends for long periods and whose profits are rising. And it increases with the passage of time.
Therefore, do not choose a share of a company that distributes profits in a year, and then after two or three years, it realises a loss. This means that a company benefits from a particular circumstance for a specific period and cannot continue to make profits.
- We move on to the fourth piece of advice from Warren Buffett: to buy undervalued stocks. Warren Buffett always buys undervalued stocks and calculates the actual value of the company’s shares by looking at the return on investment and operating margins during the past five years or more, and makes sure whether the company has debt or not. Then, he compares the company’s situation with similar companies to see whether its shares are undervalued.
- We come to the fifth and last piece of advice: buying and holding. It is known that Warren Buffett likes to buy shares and keep them for long periods. Still, on the other hand, he confirms that this does not mean that he keeps a company that realises losses or achieves a successive decline in its profits. He looks at his investment portfolio, and if a company loses a competitive advantage, he sells his shares in this company or reduces its number. Buffett advises investors to be patient and to wait for the right price and opportunity to buy.
