Think Like Warren Buffett

 

Famed investor Warren Buffett celebrated his 90th birthday recently on August 30th. Also known as the Oracle of Omaha, Buffett is a prominent advocate of the power of compounding and, interestingly, he has always been very open about how he amassed his fortune, giving advice and sharing how he built his career as a world-class investor. In this article, we have collected some of his greatest tips for investing.

The power of compounding

Acquiring 90% of his wealth after the age of 65, Buffett has proved how powerful compounding is. To Buffett, compounding isn’t based solely on how much your money grows, but it is also focused on how long a time frame it has to grow. Growing up, Buffett could see $10 in his hand and picture what it would be worth in 30, or even 50, years were he to invest it. This led him to reconsider every purchase he made. He could either spend $10 on something insignificant today, or he could invest it for 50 years and end up with over $450 (using an annual return of 8% which was the average historical return of the S&P 500).

Think long-term

Long-term thinking is one of Warren Buffett’s tips for investing. When choosing what to invest in, always consider which businesses have staying power and not the ones that are necessarily performing well right now. One of his greatest quotes on this is, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

Invest in yourself

Another helpful tip from Buffett is to invest in yourself. This includes taking care of your mind and body. You only get one mind and one body, he states. You have to take care of yourself. He also suggests learning to communicate better in person and in writing. This will help you in many aspects of your life.

Invest in index funds

Index funds are an investment that Buffett often suggests for individual investors. Index funds are relatively inexpensive and usually hold a basket of companies across a number of different sectors. For example, one of the leading indices in Canada is the S&P/TSX 60 which holds the top 60 companies across ten different industry sectors on the Toronto Stock Exchange. These 60 companies are constantly being updated so, effectively, the investor gets their portfolio rebalanced automatically.

Money isn’t everything in life

Lastly, to think like Warren Buffett, you have to remember that money isn’t everything. Buffett doesn’t equate money to success. To him, being successful in other parts of your life is what is most important. This includes family, health and your well-being.

We hope these short lessons from Warren Buffett can help you on your journey in investing and in life. At Retire on Time, we want to give all Canadians the tools to not only retire when they want to, but also create a better life for themselves!

Please feel free to send this blog post to anyone you think could benefit from it. If you have any questions,please reach out to your financial advisor or myself, Brian Moylett, atbmoylett@wisdomsi.ca, or call/text at 778-951-2806.

 

Photo rights: Harvard Business Review 

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