‘’It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.’’
A quick Warren Buffet biography:
American business magnate and successful investor, Warren Buffet has a lot to learn from. He is considered to be- and in my opinion, is- one of the most successful investors of all time. As of March 2017, he is the fourth wealthiest person in the world, with a total net worth of $73.3 Billion.
It was during the years of his youth- spent in Omaha, that Warren developed an interest business and investing, eventually entering the Wharton School. He later transferred and Graduated from the university of Nebraska-Lincoln, aged 19. He centered his investment philosophy on the concept of value investing and soon after attending the New York Institute of Finance, began various business partnerships. He created the Buffet Partnership, and his firm eventually acquired the textile manufacturing firm, Berkshire Hathaway, the fourth largest public company in the world, and the 9th largest conglomerate, by revenue.
To know more about his life, make sure to grab a copy of his biography, "The Snowball: Warren Buffett and the Business of Life- By Alice Schroeder". Purchase a copy below this article, and we'll ship it to you for free.
Here are his top 5 Personal finance Tips:
1."Someone's sitting in the shade today because someone planted a tree a long time ago"
The lesson here is to be a forward thinker when it comes to personal finance, whether you're talking about investing, saving, or spending. When you're deciding whether to put some more money aside for emergencies, think of a financial emergency actually happening and how much easier your life will be if you have enough money set aside.
Similarly, few people get rich quick by investing, and most people who try end up going broke. The most certain path to wealth (and the one Buffett took) is to build your portfolio one step at a time, and keep your focus on the long run.
2. "Only buy something you'd be perfectly happy to hold if the market shut down for 10 years."
In addition to this, one of my all-time favorite Warren Buffett quotes is "our favorite holding period is forever," which is also one of the most misunderstood things he says. The point isn't that Buffett only invests in stocks he's going to buy and forget about -- after all, Buffett's company Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) sells stocks regularly, and for a variety of reasons. Rather, what Buffett is saying is to invest in stable, established businesses that have durablecompetitive advantages. That is, approach your investments with the long term in mind, but keep an eye on them to make sure your original reasons for buying still apply.
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3. "Price is what you pay, value is what you get."
When you're buying an investment (or anything else for that matter), the price you pay and the value you receive are often two very different things. In other words, you should buy a stock if you believe its share price is less than the intrinsic value of the business -- not simply because you think the price is low.
For example, if a market correction hit tomorrow and a certain stock were to fall by 10% along with the overall market, would the business inherently be worth 10% less than it is today? Probably not. Similarly, if a stock rose rapidly, it wouldn't necessarily mean that the value of the underlying business had risen as well. Be sure you consider value and price separately when making investing decisions.
4. "Cash is to a business as Oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent."
One of the reasons Berkshire Hathaway not only survives recessions and crashes, but tends to come out of them even better than it went in, is that Warren Buffett understands the value of keeping an "emergency fund." In fact, when the market was crashing in 2008, Berkshire had enough cash on hand to make several lucrative investments, such as its purchase of Goldman Sachs warrants.
Granted, Berkshire Hathaway's rainy-day fund is probably a bit bigger than yours; Buffett insists on keeping a minimum of $20 billion in cash at all times, and the current total is around $85 billion. However, the same applies to your own financial health. If you have a decent stockpile of cash on the sidelines, you'll be much better equipped to deal with whatever financial challenges and opportunities life throws at you.
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5. "Risk comes from not knowing what you're doing."
In Buffett's mind, one of the best investments you can make is in yourself and the knowledge you have. This is why Buffett spends hours of every day reading, and has done so for most of his life. The better educated you are on a topic, whether it's investing or anything else, the better equipped you'll be to make wise decisions and avoid unnecessary risks.
The more you learn, the more you earn:
I, for one, truly believe in reading as a life-changing habit. I have gone over its' benefits several times on this blog, but here you have advice from the man himself, Warren Buffet.
Here are a handful of reads, we recommend every entrepreneur out there to get their hands on, including Warren Buffet's autobiography. Purchase a copy below and we'll ship it to you for free.
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