Warren Buffett is the world's 6th richest man in the world with a net worth of around $96 billion. Not Buffett not only himself but following his footprints and investment strategies, many people have built their wealth. The journey of Warren Buffett to his ultimate fortune is the result of consistent efforts, rock-solid investment plans, continuous learning, and dedicated workflow. This article covers five principles of Warren Buffett that every investor must know to be successful in the market.
Almost every stock trader follows Warren Buffett and wants to be like him. Here are the five investment principles of Buffett that he never compromises.
Long-term investment has always been a fruitful strategy for any investment. Warren Buffett has also backed his investment portfolio with patience and persistence over certain stocks. Berkshire's investment in IBM lasted for several years until the company faced a massive decline in the market. Frequent trading and jumping from one stock to another can affect your investment. That is why Buffett has always been a hallmark of long-term investment. He believes that holding a stock for the long term could overcome all the market volatilities.
Buffett never follows the crowd. Instead he creates his own strategies to get the ultimate value from his investments. A sudden hype in a particular stock can attract many people, but not all sky-rocketing stocks sustain for a longer period. You must research the industry and the company to know the stock's actual performance over several years. If everything remains well, only then you can invest.
This is one of the least discussed aspects of stock trading. Warren Buffett has never continued his investment in a company that faces continuous decline in the market. Sticking to a declining company for too long could be dangerous as well because it will affect your overall investments.
Buffett says – "When I buy a stock, I think of it in terms of buying a whole company, just as if I were buying a store down the street." Buying a company's stocks means that you are acquiring a certain percentage of a company. So, if you are investing in a venture, you must first analyze the industry and company thoroughly to get an idea of its past performance and future plans. This will help you adjust a particular company in your portfolio according to the risk and return. This will also help you shape your future expectations from the company.
Warren Buffett always emphasizes that investors should not panic under any circumstances. It's natural that when something goes up, it always comes down. The same is the case with the stock market. Boom, fall, or market corrections must not affect your investment strategy. A little tweak in your plans is okay, but pulling out all the investment or making a complete shift could be dangerous for you. So, be patient in every situation and act strategically. Warren Buffett's investment philosophy is founded on timeless and core principles. Buffett analyzed his markets thoroughly, remained calm in tumultuous times, and made large bets on underexplored, undervalued companies.