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Warren Buffett's 5 Rules For Investing

Warren Buffett's 5 Rules For Investing

Warren Buffett's 5 Rules For Investing
  • You don't need to be an expert to achieve investment returns. 
  • Focus on the future productivity of the asset you are considering.
  • If you focus on the prospective price change of a contemplated purchase, you are speculating.
  • Games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard.
  • Listening to the macro or market predictions of others is a waste of time - it may blur your vision of the facts that are truly important.

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IDEA EXTRACTED FROM:

Warren Buffett's 5 Rules For Investing

Warren Buffett's 5 Rules For Investing

https://www.businessinsider.com/warren-buffetts-investing-fundamentals-2014-2#

businessinsider.com

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Key Idea

Warren Buffett's 5 Rules For Investing

  • You don't need to be an expert to achieve investment returns. 
  • Focus on the future productivity of the asset you are considering.
  • If you focus on the prospective price change of a contemplated purchase, you are speculating.
  • Games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard.
  • Listening to the macro or market predictions of others is a waste of time - it may blur your vision of the facts that are truly important.

SIMILAR ARTICLES & IDEAS:

Never Lose Money

  • Rule No 1: Never lose money.
  • Rule No 2: Never forget rule No. 1.

If you work from a loss, it's much harder to get back to where you started, not to mention ea...

High Value at a Low Price

  • Price = what you pay.
  • Value = what you get.

You lose money when the price you pay does not match the value you're getting. For example, when you're paying high interest on credit card debt or spending on stuff you hardly use.

You gain money when you look for opportunities to get more value at a lower price: For example, buying quality merchandise when it is marked down.

Form Healthy Money Habits

Most of your behavior is habitual. You can change your habits and the earlier you start, the better.

Saving is a habit. Learn the habits of saving properly early. Pay attention to your money habits. Strengthen those habits that help your finances, and break the habits that hurt your finances.

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Investing defined

Investing is about laying out cash or assets now, in the hope of more cash or assets returning to you tomorrow, or next year, or next decade.

Most of the time, this is best achieved th...

Productive assets explained

  • Productive assets are investments that internally throw off surplus money from some sort of activity. 
  • Each type of productive asset has its own pros and cons, unique quirks, legal traditions, tax rules, and other relevant details.
  • The three most common kinds of investments from productive assets are stocks, bonds, and real estate.

Investing in Stocks

  • It means investing in common stock, which is another way to describe business ownership or business equity.
  • When you own equity (the value of the shares issued by a company) in a business, you are entitled to a share of the profit or losses generated by that company's operating activity.
  • Equities are the most rewarding asset class for investors seeking to build wealth over time without using large amounts of leverage.

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Financial planning

 ...is the process which provides you a framework for achieving your life goals in a systematic and planned way by avoiding shocks and surprises.

Try making a budget

  • Create a full inventory of expenses in front of you: Categorize them into fixed and variable; urgent and non-urgent; necessities and luxury; avoidable and unavoidable.
  • You can create a hierarchy of needs and decide which one’s to address first. It’s all about prioritizing. 
  • Accept that you have limited resources and unlimited wants. But you have to manage your resources. The sooner you accept this fact, the better you can control your impulses towards avoidable expenditures.

Maintain a personal balance sheet

It’s a statement wherein you can jot down your assets and liabilities.

  • Pull together your bank statements and other proofs of the liabilities
  • List down your assets like the bank balance, all investments, home value, and value of other assets.
  • Take a sum of all the assets to arrive at the total value of your assets.
  • List down your liabilities the (car loan, home loan, credit card balances etc.)
  • The sum of all the liabilities will show the value of the money you owe.
  • When you subtract the value of liabilities from assets, you get your Net Worth.

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