Warren Buffet’s Top Tips on Investing for Beginners
On the recent occasion of his 87
Broad Diversification Can Be Overrated is the first piece of
What he is saying is that some investors diversify their portfolio very broadly to stick to the general principle that they should not be overexposed to one investment. While broad diversity does reduce risk it can also make it hard to keep track of all of the investments in a portfolio, especially for beginners. This can mean that adjustments that should be made and stocks that it might be best to now sell, slip off the radar.
Buffet advises that investors should choose stocks for the long term and keep faith in their investments. Not having too many to be able to easily keep track of is a good approach for beginners and they shouldn’t panic if the share price of one sinks at a particular moment as long as the reasons it was chosen in the first place are still valid.
He also says that investors shouldn’t be afraid to invest more heavily in a good opportunity, a sentiment nicely expressed by the Buffet quote “when it’s raining gold, put out the bucket not the thimble.”
Trust yourself is another key piece of
Focus on the right news is also important for beginners who tend to read too much into headlines. Buffet believes that most investors take decisions based on 1% of the financial news they read and it’s usually based on sensationalist headlines.
As a result, they sell investment when bad news appears, such as revenues slumping by 10%. Buffet thinks that too many investors overreact to shocks in the news and don’t consider
Finally, consider buying any stock in the same way you would consider investing in a local business you know well. It
Too many beginner investors think that investing in the stock market is complicated. Well, it is and it isn’t. A prospective investor has to think about the business they are considering buying shares in, in the same way as that local corner shop. The same factors, on a bigger scale, will be key to its future success.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.