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10 Money Management Lessons We Can Learn From Warren Buffett by hienyimba(m): 10:59pm On Jul 31, 2012 |
10 Financial Lessons We Can Learn From Warren Buffett Feeling in the dark about your financial situation? Who better to listen to than the third-richest man in the world? Learn the keys to success from someone who's no stranger to it. 1. Spend wisely. - Buffett still dwells in the 5- bedroom apartment he purchased 55 years ago. - Money invested can earn over 20% annual return. - Median household income: $ 45,800 (2010) - Average spent on frivolous purchases: 15% or $6,870 - enough money to fill up a Hummer gas tank nearly 7x each month for a year 2. No one cares about your money as much as you do. - Buffett makes all his own investment decisions for his best interests ? not the commission- based interests of financial advisors, stock brokers etc. - Over 1 in 3 Americans works with a financial planner - But 45% of Americans have no financial plans - 7% don't even have goals or strategies they would use 3. Do your homework: scan thousands of stocks. - Buffett spends 18 hours a day working on investment capital, saying investors should think of themselves as partial owners. - 'Never invest in a business you cannot understand.' - Warren Buffett - 40% of Americans say they're financially literate, but 1 in 3 Americans couldn't correctly answer this question: - $100 is in a savings account with a yearly interest rate of 2%. After 5 years untouched, how much money is there? - A: More than $102 - B: Exactly $102 - C: Less than $102 - (Answer: A: More than $102) 4. Overcome your fear of risk. - Americans are afraid that investing will cause them to lose money, but Buffett says stocks outperform bonds, banks and even gold, and are safer, too. - 'Risk comes from not knowing what you are doing.' - Warren Buffett - 29% of Americans are too risk- averse to invest in stocks - 52% of those under age 31 feel the same - Yet for nearly 90 years, leading stocks have averaged 10% annual returns 5. Focus on the long term. - Putting off saving/investing means you'll need to save more in less time for the same outcome. - Buffett equates life to snowballs; think of investments the same way: - 'The important thing is finding wet snow and a really long hill.' - Warren Buffett - Compare Scenarios: - Saver 1: - Starts saving at age 21 - Puts away $500/month through age 30 through 9 years - Gets 7% annual return - Reaches $1 million by age 65 - Saver 2: - Starts saving at age 31 - Put away $500/month through age 65 - 34 years - Gets 7% annual return - Reaches $1 million by age 65 - by contributing $150,000 more over the years 6. Invest in quality businesses. - The result of doing your homework is determining worthy companies. Buffett is famously invested in Coca Cola, Wells Fargo and IBM. - 'An investor needs to buy the stock as if he is buying the whole company down the road.' - Warren Buffett - Remember Enron? It used to make headlines in a good way... - Average lifetime of a Fortune 500 company in the 1960s: 75 years - Average now: 15 years or fewer 7. Hunt for exceptional bargains for solid companies. - Buffett recommends buying stock during a crash, when even great companies have extremely low prices. - Analyze performance, mission statements, business process, long term goals and more. - Fewer stocks can be better, so invest more time in more research, rather than more stocks. - 5 valuable stocks can yield 71% of the benefits of a fully- diversified portfolio - 15 valuable stocks can yield 87% of the benefits 8. Make decisions to invest based on how well money is being used by company management. - Buffett feels penny-pinching indicates a profitable mindset. Once, he acquired a company whose owner took the time to discover his toilet paper roll wasn't really the advertised 500 sheets! - Assess these for the best picture: - Return on Equity (ROE): Company's net profit divided by shareholder's equity - Return on Capital Employed (ROCE): Company's earnings before interest & tax deductions (EBIT) divided by the result of its total assets minus current liabilities - Ideal condition: ROE and ROCE are about equal - Over 40% of Americans report having made investment decisions based entirely on emotion - Nearly 1 in 2 men have done so - 1 in 3 women have done so 9. Be patient; wait until everything is in your favor to invest. - When conditions align, buy an appropriate amount of shares. Buffett rec |
Re: 10 Money Management Lessons We Can Learn From Warren Buffett by hienyimba(m): 11:14pm On Jul 31, 2012 |
contd... Buffect recommends holding stocks in 10-15 companies. - In bad times, hold on. A quality stock should recover and you won't have to regret selling prematurely. - 'I think the worst mistake you can make in stocks is to buy or sell based on current headlines.' Warren Buffett - 57% of retirement-age Americans have financial regrets - Biggest financial regret for millionaires: poor stock decisions (10% regret this) 10. Sell losing stocks when the market is up; buy winning stocks during a crash. - Selling a dud stock at its worst adds to your loss, and purchasing a great stock at peak price cuts your gains. - 'The beauty of stocks is they do sell at silly prices sometimes. ... That's how Charlie [Munger] and I got rich.' - Warren Buffett - 25% of Americans track the ups and downs of the stock market at least weekly... but 17% think the market is too complicated and 11% just don't know where to begin. With these tips from guru Warren Buffett, you don't have to take part in financial fear anymore. Go forth and invest wisely![http://bestfinanceschools.net/warren-buffett-advice/] 1 Like
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Re: 10 Money Management Lessons We Can Learn From Warren Buffett by Nobody: 11:23pm On Jul 31, 2012 |
Seun will like this, trust me he's a Warren Buffet adherent. |
Re: 10 Money Management Lessons We Can Learn From Warren Buffett by hienyimba(m): 2:27pm On Aug 08, 2012 |
really! |
Re: 10 Money Management Lessons We Can Learn From Warren Buffett by hienyimba(m): 4:14am On Jul 01, 2013 |
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