Warren Buffett is possibly the world’s most successful investor. Buffett is one of the richest men in the world and investors in his company, Berkshire Hathaway, have enjoyed outstanding returns over a long period. The secret to his success is not ‘sexy’; it is about adopting a disciplined and patient approach to investment and avoiding the normal traps of behavioural finance. Here he shares some of his tips:
Manage greed and fear
It means we miss a lot of very big winners but it also means we have very few big losers … We're perfectly willing to trade away a big payoff for a certain payoff."
Avoid trying to time the market
"Basically, price fluctuations have only one significant meaning for the 'true' investor. They provide him an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times, he will do better if he forgets about the stock market."
Avoid actions based on rumour or sentiments
"Be fearful when others are greedy and be greedy when others are fearful.”
Avoid emotional attachments
“Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks."
Invest for the long-term
"…in the short term, the market is a 'voting' machine (whereon countless individuals register choices that are a product partly of reason and partly of emotion), however in the long-term, the market is a 'weighing' machine (on which the value of each issue (business) is recorded by an exact and impersonal mechanism).”