They say that if you want to learn something new, you should seek out an expert and let them teach you.
When it comes to investing, the top expert is definitely Warren Buffett, regarded by many people to be the greatest investor of the last hundred years (and also one of the top 5 richest people on the planet).
If there was ever a true expert at investing, Mr. Buffett is that person. With that in mind, we’ve put together a little bit of his best investing advice from over the years. Some of it might not be as specific as you’d like but, went taken as a whole, it’s advice that will help you to make much better investing decisions.
During a panel discussion after the documentary I.O.U.S.A, Mr. Buffet told the audience that “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
What he meant was that he looks for businesses that are extremely strong, product and service-wise, so that no matter who is running them the chance of them going under is slim, greatly lowering the chance that his stock purchase will go with them.
In his 2008 letter to shareholders, something that Berkshire Hathaway shareholders anticipate all year long, Mr. Buffett had this to say about buying stocks; “Price is what you pay: value is what you get. Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
In other words, the combination of an excellent company and a low-priced stock is what you should be looking for as an investor.
When talking at the Berkshire Hathaway annual meeting in 1997, Mr. Buffett had some things to say about the “margin of safety” that many investors look for when purchasing a stock. “If you understood a business perfectly, and the future of the business, you would need very little in the way of a margin of safety,” he said.
What he meant was that the more vulnerable a business happens to be, the larger the margin of safety (i.e. lower price) that you’ll need in order to make a purchase, and vice-versa.
Finally, there’s possibly the best bit of advice that Mr. Buffett has given over the years, from his book ‘The Tao of Warren Buffett’ (2006). “Rule No.1: never lose money: rule No. 2: don’t forget rule 1”.
It doesn’t get much better than that.