Ways to Invest Like Warren Buffett
Warren Buffett is the Oracle of Omaha who banked legendary trades. Here's how to invest like Warren Buffett without needing a genius brain.
Warren Buffett is the investor that investors look up to. He's behind some of the greatest stock market trades in history, is worth $83.9 billion, and has become the man known as the Oracle of Omaha. No one, but no one, has a track record as good as he does in terms of investing success.
Truth be told, there may never be another Warren Buffett in our lifetimes. His knack for investing is something that is just very hard to duplicate—but that doesn't mean you can't try to invest like Warren Buffett. Over the years, this Omaha genius has welcomed the idea of letting millions learn how he does it.
Through books, open portfolio picks, and just being awesome, people have slowly learned how to make Buffett-like picks in the stock market. Here are some of the coolest ways to learn how to make your portfolio as strong as Warren Buffett's.
Invest in yourself.
The biggest thing that Warren Buffett warns against is forgetting to invest in the one person who always will have your interests at heart: you. If you are not investing in yourself or working towards goals that benefit you, you need to realign your priorities.
Investing and starting a portfolio is a great way to invest in yourself, but don't forget the art of bettering yourself. Everything from learning how to deal with stress, eating well, and also improving your overall knowledge range will help you—often more than buying a stock would.
If you went out for a new computer, you'd probably read up on reviews just to make sure you got a good one, right? You view your computer as an investment, and therefore do your due diligence when you select one.
Warren Buffett regularly tells people to read up before they invest, and to "invest in what you know." Knowledge is power. If you know a product is good, understand the business model, and know their long-term plans, you can better predict which stocks will do well.
Buffett made his billions by poring over tons of prospectus papers. Don't be afraid to do the same, and don't be afraid to ask questions about your investments. And above all, if the investment doesn't make sense to you, don't invest.
You don't have to be an egghead to invest like Warren Buffett on this end. An investment research app like ClosingBell is a good way to get the scoop on an investment before you buy—not to mention a good way to find out what experts are saying about it, too.
Forget short term investments, and look to the long haul.
If you want to invest like Warren Buffett, you can't be a short-term investment person. Buffett has always been someone who kept things for the long haul. Long-term investing is the best way to get the most from investments, keep costs low, and also maintain a stable portfolio.
That's why Buffett is famous for investing in companies that are made to stand the test of time. He's not looking for fast cash, since fast cash isn't easy cash.
Warren Buffett famously advised that it's better to spend a lot of money on a great stock, than little money on a stock that's mediocre. Obviously, most of us can't afford to invest with the kind of money that Berkshire Hathaway has—but that doesn't mean that great stocks are out of reach!
If you do your research, you will notice that a lot of apps for micro-investing allow you to buy individual slices of shares from blue chip companies like Coca-Cola. Apps like Stash actually allow you to buy slices of major company shares for as little as $5, and even has an ETF called "Roll With Buffett" based on Buffett's own portfolio.
By buying slices of good shares when you are able to, you can invest like Warren Buffett without needing to earn tons of cash. Stash also is a great app for investing beginners, so you can also learn tons from it while you make money.
Invest in good management.
Make no mistake about it, if you want to invest like Warren Buffett, you need to look at a company's culture.
There's a reason why so many of the signs a company's about to fold deal with management. Good management breeds great work results, while bad management tends to be a sign that a company will note fare as well as it could.
Whenever possible, try to invest in a company that has a notably good company culture with excellent management. Money can't always buy good management, so if you notice a company with great managers, don't be afraid to invest.
Warren Buffett loves times of economic downturn, because it's a time when most investors panic-sell their stocks. During a bear market, people are typically freaking out because they're worried that stocks will continue to plummet. Buying stocks during this time means you get low prices, and if you're careful, great returns.
The idea behind this concept is the knowledge that the market can, and will, always recover eventually. So, you might as well look at an index fund like ones based on the S&P 500 or the Dow Jones. By buying up index funds that are closely tied to the markets, your return improves as the market standing improves.
A common theme among non-investors is that you "can't afford" to invest in a bear market. You don't need to have a fancy investment account or too much money to shop around. Apps have cut costs dramatically. For example, Stockpile is an investing app that lets you buy stocks on the go with little to no fees.
Either way, if you want to invest like Warren Buffett, getting an app like Stockpile and getting aggressive during bear markets is the way to go.
Do whatever you can to avoid panic-selling.
If you remember the Great Recession, then you already know how incredibly tempting it is to panic-sell along with everyone else. It's a sickening feeling seeing the value of your investments tank.
However, if you invest in companies that have great management, long-term staying power, and reasonable valuation, your best bet is to "buy and hold." Good times always follow the bad; that's how life is.
Having the willpower to buy and hold is what makes it so hard to invest like Warren Buffett.
Believe it or not, paying taxes on the capital gains from stock investments is actually cheaper than having a full-time job. However, that doesn't mean that you should happily pay all those fees and fines. If you incur a loss in investing, you can actually do something called "tax loss harvesting" to offset your taxes.
Certain investment buying apps, such as Betterment, actually offer this as an added service to users. That can be massive once tax time rolls around. Almost every billionaire investor does tax loss harvesting, including Buffett. If you want to invest like Warren Buffett, this is a good strategy to employ.
Invest using what your wealth can afford you—and invest in yourself.
Over the years, there have been a lot of articles explaining why it's impossible to invest like Warren Buffett—or why it's downright dangerous to try. These writers argue that Warren Buffett used Berkshire Hathaway for his investments and also point out the discrepancy in value from Berkshire's stock versus the stocks the company manages.
However, they're missing the point, here. Buffett's insane wealth isn't just due to Berkshire Hathaway. He had to start somewhere, and so do you. At one point, he was a middle-class individual just like you and me.
The reason he can invest the way he does now is because he worked his way up there and also built the Berkshire Hathaway brand. So, he invested in himself, his business, and used what he could to get to where he is now.
As you gain more money, opportunities to invest will open themselves to you. That's just the way it is. To invest like Buffett, you have to seize the opportunities you can and work your way up.
Obviously, the best way to invest like Warren Buffett is to take advice straight from the man himself. While we can't all call up our billionaire buddies to find out the latest scoop on Wall Street, we can read the books that he published on investing to learn what he would tell us.
The Essays of Warren Buffett is his top-selling book, and it's filled to the brim with excellent advice for anyone working in a corporation—not to mention investors who want to get into his mind.
The most important aspect of learning how to invest like Warren Buffett is learning to appreciate knowledge. Buffett himself never stops learning, so why shouldn't you follow his lead?