Two lessons to learn from Warren Buffett to help you achieve investment success

Julie Brownlee, Fsp Invest, 31 Mar. 2014

Tags: investment, investing, warren buffett, buffett, shareholder letter, investment success, buffett’s tip to investment success, potential return, strategy, falling asset prices



Warren Buffett has built up an impressive reputation in the investment world over several decades. Most investors would love to replicate even a fraction of his investment success. But how has he achieved this? Read on to uncover two tips that have helped Warren Buffett amass his riches…



Warren Buffett parts with his investing insights in his annual shareholders letter

Every year, when Berkshire Hathaway releases its annual results, investors are eager to read Warren Buffett’s letter, Phil Oakley in Money Week explains. Every year, without fail, Warren Buffett writes a letter to his shareholders.

Investors are desperate to read the letter to find out if Buffett has revealed any secrets to his investing success.

This year, according to Fortune, Buffett reveals what investors can learn from his experience. Read on to uncover two aspects that have helped him achieve investment success…

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Lesson 1: Learn to embrace falling asset prices

You need to take advantage when share prices are falling and times are tough.

This type of scenario often leads to investors selling, which just pushes prices down further. Investors may also be selling their holdings because they’re experiencing financial problems.

Together, these two factors mean that many bargains can present themselves in the market. And this doesn’t just apply to the stock market. This applies to all asset classes, including property.

Lesson 2: When you invest, think about the potential return

But before you leap into investing in unloved assets, you need to do some calculations. You need to estimate the future earnings you could get.

Buffett discovered this from his mentor Benjamin Graham, the ‘father of value investing’.

You need to work out the estimated return, or the interest, you’ll receive from the investment. The higher this potentially is, the more you can justify the risk you take on.

When Buffett does this, he ignores the effect of debt. This is because this can artificially boost your potential returns. And by using debt to buy an asset, you automatically increase the risk involved.

So there you have it, two lessons you can learn from Warren Buffett to achieve investment success.


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