Even at six years old, Warren Buffett knew how to make a profit. According to “The Biography of Warren Buffett,” by Joshua Kennon, Buffett would purchase six-packs of Coca-Cola from his grandpa’s grocery store and resell each bottle, “pocketing a five-cent profit.” He bought his first stock when he was 11 years old.
Although he didn’t want to go to college, his father persuaded him to attend the Wharton Business School at the University of Pennsylvania for two years.
“Complaining that he knew more than his professors, he returned home to Omaha and transferred to the University of Nebraska-Lincoln.”
In graduate school at Columbia, Buffett met “famed investors Ben Graham and David Dodd.” Graham would become Buffett’s mentor.
You can study many aspects of Buffett’s life and the way he invests. One of his well-known quotes shows his investment style. “If I cannot understand it, I will not invest in it.”
An article on Money Crashers tells five key principles to invest like Warren Buffett. It first establishes the fact that Buffett acquires ownership in what he invests in rather than simply investing like an average investor. However, “you can follow Buffett’s approach to generate more profits and reduce losses.”
- Make A List Of Criteria To Buy A Stock.
You can “look for stocks within a certain industry and with a specific price-to-earnings ratio or six-month moving average.” The price shouldn’t be your only determining factor. Just make sure you meet your established criteria.
- Invest In Industries And Companies Familiar To You.
If you know about the industries and companies you invest in, it’s easier to stay current on trends and company news. Following random stock tips is a recipe for long-term failure. Research before you invest.
- Stay In Cash If Necessary.
It’s okay to stay in cash if there aren’t any companies that fit your investment criteria. Cash is a position.
- Follow The Companies.
“Once you invest, follow the companies on a monthly basis.” Don’t look at them daily.
- Sell At The Right Time.
Sell the stock when the company no longer matches the criteria you had for buying. Buffett “has rules and he diligently follows them. When a company no longer fits his criteria, he sells.”
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