Berkshire Hathaway is up 17% this year and has averaged 20% p.a. for the last 50 years. The S&P boasts a profit of 6%. How does Warren Buffet do it?
By following his investing history, we can learn many things about good investing and building financial freedom.
He chooses long-term investments and looks for potential in what will perform well in the future. He likes long-term investing, which is the key to building wealth and financial freedom over time.
He invests in companies He understands. He looks for good companies with good management. Companies and industries that he understands and is knowledgeable of. It is not ideal to invest in companies or sectors you are unfamiliar with.
Looks for companies with a moat. These companies have space for competitors to come in. Companies that are difficult to compete within the industry they thrive in, like Apple.
He is a patient investor, sees wealth building as long-term, and doesn’t sell too early when markets become volatile. Long-term investing rides the ups and downs of the markets and smooths out volatility over time.
Diversifies his Portfolio. One of the most important things to do to spread the risk of losses is diversification. Not carrying all your eggs in one basket means investing in various asset classes, regions and sectors that do not correlate. So if one industry, asset class or region performs poorly, it won’t affect the other investments negatively.
Financial freedom is possible if you have defined financial goals, know what you want, and make plans to achieve them. If you want to achieve financial freedom or optimise your investments, meet with a financial advisor to analyse your portfolio.