🌼5 Simple Wealth-Building Tips From Warren Buffett Anyone Should Follow
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
Warren Buffett is one of the best investors to have ever walked on this planet.
At the moment of writing, his net worth is about $107.6 billion, making him the sixth richest person on Earth.
His biography, Buffett: The Making of an American Capitalist contains a ton of lessons on how to build wealth and become a better investor.
Here are five simple wealth-building lessons from the book.
Upgrade Your Network
One of the best things you can do to build your wealth is to seek out people who are financially better off than you.
When you hang out with people wealthier than you, you’ll automatically take on their habits, mindset, and beliefs.
As Warren Buffett said, “It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”
All in all, you become who you surround yourself with.
This also means that if you hang out too much with people who have lousy habits and who never talk about money or personal growth, you’ll slowly drift in their direction as well.
That’s why it’s essential to hang out with the right crowd.
Make sure the people you spend the most time with inspire you, lift you up, and push you to greater heights.
Self-Control > High IQ
Many people think they need a high IQ to become successful investors. They believe they need to be great at math, learn complicated formulas, or read difficult stock charts.
None of this is true.
In reality, successful investing is more about behavior than intelligence.
As Roger Lowenstein, author of Warren Buffett’s biography, said, “Buffett’s genius was largely a genius of character — of patience, discipline, and rationality.”
In fact, it’s all too common that people with high IQs tend to be terrible investors simply because they don’t master their emotions:
They overestimate their own ability to pick winning stocks
They panic when stock prices fall and sell at bottom prices
They get too greedy when stock prices rise and invest right at peak prices
They let themselves get carried away with opinions from financial news, neighbors, or colleagues
As Buffett’s business partner Charlie Munger once said:
“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline.”
All in all, successful investing requires patience, self-control, and self-discipline. These traits are infinitely more important than a high IQ.
Go Big On Wealth-Building Opportunities
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble,” said Buffett.
Although market downturns (like the one we’re in since last year) can be scary, they form enormous wealth-building opportunities.
During these periods, the highest-quality companies sell for discount prices. That’s the time to go big.
As Buffett said, “Widespread fear is your friend as an investor because it serves up bargain purchases.”
Think about it:
When groceries are on sale, you buy some extra
When there’s a great Black Friday deal, you purchase something
When clothes are selling at a 25% discount, you buy it
So why don’t you buy some more stocks when they’re selling at a discount?
It’s the exact same principle: You get the same ‘product’ but at a cheaper price.
As Buffett said, “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
You Are Your Most Valuable Asset
Investors tend to think of their stocks, index funds, and real estate as their main assets.
But as Buffett said, “A person’s main asset is themselves, so preserve and enhance yourself.”
Invest in yourself by learning new skills, reading books, getting in shape, and following educational courses.
“The most important investment you can make is in yourself. One can best prepare themselves for the economic future by investing in your own education.”
— Warren Buffett
The more you invest in yourself, the more valuable you become. The more valuable you become, the better you set yourself up for financial success.
Read also: How to be consistently productivitive
Long-Term Investing > Short-Term Speculation
Warren Buffett once said, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
Don’t invest in a stock just because you think its price is going to rise this week, month, or even this year.
That’s not even investing, it’s speculating.
When the market dips, you’re left holding a subpar company at a loss. That’s not a position you want to find yourself in.
Besides, the stock market is too unpredictable in the short term.
The odds of consistently trading in and out of stocks at the right prices are low — especially over the long run.
Instead, it’s better to keep a long-term perspective when investing.
Personally, I only invest in stocks that I’m willing to own for at least 5–10 years. And most of my ETFs and index funds I’m willing to own for at least 30+ years.
This way, you take advantage of the power of compound interest and avoid the risks of short-term market timing.
CONTRIBUTED BY Jari Roomer
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