Warren Buffet is the richest man in the world, with an estimated wealth of $62 billion. He is eminently regarded as one of the most successful investors in the world and is called a ‘Legendary Investor’.
When he began buying stocks in Berkshire Hathaway in 1962, one share cost him around $7.50 dollar. But today the entire scenario is changed and at 81, Buffet is Berkshire’s Chairman and CEO and one share of the company’s class ‘A’ stock worth is close to $119,000. He credits his amazing success to several key strategies. Here are some of Buffett's money-making secrets and tips for you to get rich -
1. Reinvest Your ProfitsWhen you first make profit in the stock market, you may be tempted to spend more in order to gain more. But he says, “Don't.” Instead, he suggests reinvesting the profits. Buffett learnt this lesson much early. In his high school, he and a mate bought a pinball machine to pun in a barbershop. With the money they earned, they bought more machines. When the friends sold the scheme, Buffett used the proceeds to buy stocks so that he could start another small business with the profit. By 26, he'd accumulated $174,000. Even a small sum can turn into great wealth, if it is wisely invested
2. Be Willing To Be DifferentDon't let your decisions be based entirely upon what everyone says or does. When Buffett began handling money in 1956 with $100,000, he started with a handful of investors. Back then he was dubbed an oddball. He worked in Omaha, not Wall Street, and he refused to inform his parents where he was investing their money. People foresaw it as a failure but after 14 years, when he closed his partnership; it was worth more than $100 million. Instead of following the crowd, he went out of the box and looked for underrated investments and ended up vastly beating the market average every single year. To Buffett, what everybody is doing is doing is the average. He says ‘to be above average, you need to measure yourself’ which he calls as ‘Inner Scorecard’, that is ‘judging yourself by your own standards and not the world's.’
3. Never Suck Your ThumbWhen you need to make money investing or money making decision, gather all information regarding it in advance and solicit a friend or relative to make sure that you stick to your self decided deadline. Buffett prides himself on swiftly making up his mind, taking a decision and executing it. He calls any unnecessary sitting and thinking as “thumb sucking.” Whenever people offered him a business or an investment, he on spot answer was always, “I won't talk unless they bring me a price.”
4. Spell Out the Deal Before You StartYour bargaining power is always at its greatest before you begin a job. This is a time when you have something good to offer to the other party. Buffett learnt this lesson the hard way as a kid, when his grandfather Ernest hired him to dig out the family grocery store after a blizzard. The boys spent five hours scooping until he could barely straighten his frozen hands. Afterward, his grandfather gave him less than 90 cents. Warren Buffett was shocked to see that he performed such backbreaking work only to earn pennies per hour. Always nail down the particulars of a deal in advance even the deal is with your friends and relatives.
5. Watch Small ExpensesWarren Buffett invests in businesses which are run by managers who are obsessed even over the tiniest of cost. He once acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being cheated and Buffet really appreciated this. He also admired a friend who painted only the road facing side of his office building. Exercising alertness over every expense can make your profits and your paycheck.
6. Limit What You BorrowLiving mostly on credit cards and loans will not make you rich. Buffett has never borrowed a noteworthy amount, not even to invest or mortgage. He has gotten a number of heart rendering letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice: “Negotiate with creditors to pay what you can. Then, when you're debt-free, work on saving some money that you can use to invest,” as quoted on his official website.
7. Be PersistentWith obstinacy and resourcefulness, you can even win against a well established competitor. In 1983, Warren Buffett acquired the Nebraska Furniture Mart as he liked the way its founder, Rose Blumkin, did business. She was a Russian immigrant, who built the mart from a pawnshop into the largest furniture store in North America. Her strategy was to undersell the rich ones and she was a merciless delegate who was very good in negotiation. To Warren Buffett, Rose personified the unwavering courage that makes a winner out of an underdog.
8. Know When to QuitOnce, when Warren Buffett was in his teens, went to the racetrack. He gambled on a race and lost. To get back with his funds, he bet on another race. He lost again which actually left him with nothing. He felt sick and wasted nearly a week's earnings. But Buffett learnt from this and never repeated any such mistakes. He says, “Know when to walk away from a loss, and don't let anxiety fool you into trying again.”
9. Assess the RiskIn 1995, an employer of Warren Buffett's son, Howie, was accused by the FBI for price-fixing. Warren Buffett advised Howie to imagine the worst and best case scenarios if he stayed with his company. His son quickly realized the risks of staying in the company anymore and he quit the very next day. Hew says asking yourself “and then what?” can help you much more and will let you see all the possible consequences when you're struggling hard to make a decision.
10. Know What Success Really MeansDespite his wealth, Warren Buffett does not measure success as per the number of dollars. In 2006, he vowed to give almost of his fortune to charities, primarily to the Bill and Melinda Gates Foundation. He’s adamant about not funding monuments to himself. He doesn’t want any Warren Buffett buildings or halls. He says, “I know people who have a lot of money and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you'll measure your success in life by how many of the people you want to have love you actually do love you. That's the ultimate test of how you've lived your life,” as quoted in his official website.
Posts
