India's GDP grew by 5 per cent in the financial year 2012-13, lowest in
the last decade. It seems the 2008 recession still looms large on our
daily lives. While a common man cannot do much about macroeconomic
indicators, it is time to revisit, learn and imbibe timeless personal
finance lessons from the maestro to overcome financial shocks in life.
Inspired from most admired finance guru in the world, we recommend five most important personal finance tips for everyone: 1. Spend wisely If you buy things you don't need, you will soon sell things you need. - Warren Buffett
All of us suffer from the urge to splurge and we justify our spending using the pretext of special occasions, peer pressure, lifestyle, family, emotions and even smart decisions. Most marketing companies understand this urge and try to exploit it by making offers that give consumers the false notion of having made the right decision. Unhealthy carbonated drinks are sold with promises of happiness, adventure, youthfulness, etc. Take the example of the current EMI options on expensive smartphones.
When one could do with a Rs. 15,000 phone (within budget), the EMI option gives a false sense of smart decision and instead makes you buy a Rs. 35,000 phone (overstretched budget). Spending wisely is not being stingy but being smart and aware. Every rupee spent on unnecessary urges contributes to lost wealth.
What you should do: Always ask these questions: Do I really need this? Am I overspending? Can I save some money without compromising on the value I want from a particular product/service? Encourage your family members to follow this path.
Lesson: Rule No. 1 : Never lose money. Rule No.2: Never forget Rule No.1 - Warren Buffett 2. Saving: Save for the unexpected Someone's sitting in the shade today because someone planted a tree a long time ago. - Warren Buffett
All of us know that saving is important for a better future. But it is alarming to observe that most of us do not even save enough for emergencies. This happens due to our myopic view about personal finance.
Instant gratification today matters more than saving for tomorrow. In fact, saving is perceived as sacrifice by people.
What you should do: Follow "pay yourself first" principle. Set aside money for your future goals (and risk) as soon as you receive your monthly paycheck. Take professional advice to know where and how much you should invest for achieving goals.
Lesson: Don't save what is left after spending; spend what is left after saving. - Warren Buffett 3. Think long-term and be patient
"No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant." - Warren Buffett
Money is part of nature, it doesn't grow overnight. However, we overestimate money we can make in a year and underestimate what we can make in 10 years. People make money by staying invested for the long-term and without doing much "dancing in and dancing out" i.e. changing portfolios frequently.
Investors around the world believe in the India story in the long-term. You can benefit from India's growth only if you invest for long-term and not panic seeing short-term fluctuations.
What you should do: Make a diversified portfolio based on your risk appetite and financial goals. Pick right financial instruments recommended by your financial advisor and invest regularly and persistently for the long term (8-10 years).
Lesson: Life is like a snowball. The important thing is finding wet snow (opportunities) and a really long hill (long term). - Warren Buffett 4. Borrowing: Limit what you borrow
You will not become rich by living on borrowed money (credit cards, loans). People initially think that borrowing is manageable. But our country is full of examples when managing debt becomes overwhelming. Borrowing should never be done without an objective assessment of future cash flow and other financial needs. One needs to have a solid plan to pay the debt back and not become its lifetime slave. A debt-free life is the best life.
What you should do: Start with thinking that borrowing money is not an option. Shift to using debit card (in-hand money) from credit card. Negotiate your interest rates with the banks and re-finance (early phase) if necessary. Objectively assess inflation rates, income growth, sources of income, assets to pledge, etc, while planning long-term borrowing.
Lesson: I've seen more people fail because of liquor and leverage - leverage being borrowed money. You really don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing. - Warren Buffett 5. Risk Risk comes from not knowing what you're doing. - Warren Buffett
Everyone wants to make money and we all want it quick. We go for investments which promise high returns. But we fail to objectively analyze the associated higher rate of risk. Trying to hit a six on every ball with your hard-earned money is nothing short of gambling. This happens because we are greedy, don't read fine prints of financial instruments and don't understand their investment objective. Our financial planning is vague and is done in a random fashion which leaves us susceptible to risk.
What you should do: Understand the objective of various financial instruments and asset classes.
Consult professional advisors to understand the investment pyramid, develop an investment strategy, review regularly and diversify.
Lesson: Investing without knowing increases risk. However, instead of shying away from investing one should acquire knowledge to get it right.
Inspired from most admired finance guru in the world, we recommend five most important personal finance tips for everyone: 1. Spend wisely If you buy things you don't need, you will soon sell things you need. - Warren Buffett
All of us suffer from the urge to splurge and we justify our spending using the pretext of special occasions, peer pressure, lifestyle, family, emotions and even smart decisions. Most marketing companies understand this urge and try to exploit it by making offers that give consumers the false notion of having made the right decision. Unhealthy carbonated drinks are sold with promises of happiness, adventure, youthfulness, etc. Take the example of the current EMI options on expensive smartphones.
When one could do with a Rs. 15,000 phone (within budget), the EMI option gives a false sense of smart decision and instead makes you buy a Rs. 35,000 phone (overstretched budget). Spending wisely is not being stingy but being smart and aware. Every rupee spent on unnecessary urges contributes to lost wealth.
What you should do: Always ask these questions: Do I really need this? Am I overspending? Can I save some money without compromising on the value I want from a particular product/service? Encourage your family members to follow this path.
Lesson: Rule No. 1 : Never lose money. Rule No.2: Never forget Rule No.1 - Warren Buffett 2. Saving: Save for the unexpected Someone's sitting in the shade today because someone planted a tree a long time ago. - Warren Buffett
All of us know that saving is important for a better future. But it is alarming to observe that most of us do not even save enough for emergencies. This happens due to our myopic view about personal finance.
Instant gratification today matters more than saving for tomorrow. In fact, saving is perceived as sacrifice by people.
What you should do: Follow "pay yourself first" principle. Set aside money for your future goals (and risk) as soon as you receive your monthly paycheck. Take professional advice to know where and how much you should invest for achieving goals.
Lesson: Don't save what is left after spending; spend what is left after saving. - Warren Buffett 3. Think long-term and be patient
"No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant." - Warren Buffett
Money is part of nature, it doesn't grow overnight. However, we overestimate money we can make in a year and underestimate what we can make in 10 years. People make money by staying invested for the long-term and without doing much "dancing in and dancing out" i.e. changing portfolios frequently.
Investors around the world believe in the India story in the long-term. You can benefit from India's growth only if you invest for long-term and not panic seeing short-term fluctuations.
What you should do: Make a diversified portfolio based on your risk appetite and financial goals. Pick right financial instruments recommended by your financial advisor and invest regularly and persistently for the long term (8-10 years).
Lesson: Life is like a snowball. The important thing is finding wet snow (opportunities) and a really long hill (long term). - Warren Buffett 4. Borrowing: Limit what you borrow
You will not become rich by living on borrowed money (credit cards, loans). People initially think that borrowing is manageable. But our country is full of examples when managing debt becomes overwhelming. Borrowing should never be done without an objective assessment of future cash flow and other financial needs. One needs to have a solid plan to pay the debt back and not become its lifetime slave. A debt-free life is the best life.
What you should do: Start with thinking that borrowing money is not an option. Shift to using debit card (in-hand money) from credit card. Negotiate your interest rates with the banks and re-finance (early phase) if necessary. Objectively assess inflation rates, income growth, sources of income, assets to pledge, etc, while planning long-term borrowing.
Lesson: I've seen more people fail because of liquor and leverage - leverage being borrowed money. You really don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing. - Warren Buffett 5. Risk Risk comes from not knowing what you're doing. - Warren Buffett
Everyone wants to make money and we all want it quick. We go for investments which promise high returns. But we fail to objectively analyze the associated higher rate of risk. Trying to hit a six on every ball with your hard-earned money is nothing short of gambling. This happens because we are greedy, don't read fine prints of financial instruments and don't understand their investment objective. Our financial planning is vague and is done in a random fashion which leaves us susceptible to risk.
What you should do: Understand the objective of various financial instruments and asset classes.
Consult professional advisors to understand the investment pyramid, develop an investment strategy, review regularly and diversify.
Lesson: Investing without knowing increases risk. However, instead of shying away from investing one should acquire knowledge to get it right.
-NDTV
Although super rich, Warren lives a “simple” life. He still drives himself to work every day and dines at Gorat’s, a local steakhouse (which is NOT an expensive restaurant) in Omaha. He is widely known for being courteous, personable, and humble. Obviously, Warren Buffett is a genius when it comes to investing and in life, so it pays to listen to his words. Here are ten famous Warren Buffet quotes that we can learn a ton from:
1. “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.” Sounds pretty simple, right? But when you’re buying or selling stocks, never losing money can seem impossible because prices fluctuate all the time. Warren, though, believes in buying the value of a company and not its stock price. He buys value at the right price, he doesn’t speculate or gamble. He makes sure that he knows a company’s value and that it will far outweigh the price that he paid for, and that is how he sticks to rule No.1.
2. “You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.” Warren is a patient man. He would never chase prices or force any investment. He waits for the right moment (dictated by either price or market condition) to pounce, and pounce he will. This requires a great deal of discipline, and that is what separates him from the majority of unsuccessful investors. Indeed, patience is a virtue.
3. “Never invest in a business you can’t understand.” This Warren Buffet quote is probably an offshoot of rule No.1. He will only play a game that he is really great at to ensure that his chances of losing are slim. Understanding a business really well can help you smell trouble from miles away. Also, you can never have conviction in something you do not understand, and conviction is what enables you to pounce on a company when the time is right.
4. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Warren would always put more value in a great company with great products and management than a mediocre one that can be bought on the cheap. A company’s stock price moves with the whims and emotions of traders and speculators, and is never a good indicator of value. Never mind Wall Street, focus on Main Street and look for a great company that brings great value to its customers, investors, and industry.
5. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” This is a great criterion in choosing a company to buy. Only buy stock in a company that will thrive, grow, and excel in the foreseeable future regardless of stock price. I only know one kind of company that fits that description, and that is the great kind.
6. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” Warren knows that the stock market is full of folly. He knows that emotions like hope, greed, and fear dictate stock prices rather than logic and value. When people are panicky or fearful (as in a bear market) he takes that chance to buy great companies at cheap prices. As long as he does his research and knows the real value behind a company, he doesn’t get scared of its price fluctuations.
7. “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.” This Warren Buffet quote shows his humility and his infinite thirst for learning and improvement. He doesn’t have a huge ego; he doesn’t think of himself as superior than anybody else out there. Nor does he think that he knows everything.
8. “Our favorite holding period is forever.” Warren plays for keeps. He doesn’t buy a company that he wouldn’t hold or manage until a very long time. Making amazing gains, like his, takes time. Start young and go for the homeruns.
9. “Only when you combine sound intellect with emotional discipline do you get rational behavior.” Investors need these two ingredients to successfully parlay the investment game. The sound intellect comes from doing your homework. It is your research and analysis of a company’s business and value. Discipline on the other hand, refers to your ability to wait for the proper price to enter. You shouldn’t chase prices in bull markets and you shouldn’t get scared in bears. Practice emotional discipline and take your investing to the next level.
10. “Without passion, you don’t have energy. Without energy, you have nothing.” Be passionate in what you do and do what you are passionate about. Passion will make you go to the ends of the earth to see a dream fulfilled. It will be your fuel in your journey. It will make you unstoppable. It will see you through when times get tough, and it will make life so worth living.
So there you go, I hope we could all learn from Warren’s words of inspiration and guidance. His principles are time-tested and proven both in life and in investing. I wish you the best, and may the “Oracle” be with you.
-Wealthlift
10 Warren Buffett Quotes You Should Learn By Heart
If you are interested in the stock market, there isn’t a chance that you haven’t heard of Warren E. Buffet. He’s the second richest man in America with a net worth of $44 B, only next to Bill Gates’ $61 B. He is the founder and CEO of Berkshire Hathaway (BRK), a holding company which owns subsidiaries that engage in diverse business activities. When it comes to investing in companies, Warren Buffett is THE MAN! Berkshire Hathaway had an overall gain of 513,055% from 1964 to 2011. WOW! AMAZING huh?!Although super rich, Warren lives a “simple” life. He still drives himself to work every day and dines at Gorat’s, a local steakhouse (which is NOT an expensive restaurant) in Omaha. He is widely known for being courteous, personable, and humble. Obviously, Warren Buffett is a genius when it comes to investing and in life, so it pays to listen to his words. Here are ten famous Warren Buffet quotes that we can learn a ton from:
1. “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.” Sounds pretty simple, right? But when you’re buying or selling stocks, never losing money can seem impossible because prices fluctuate all the time. Warren, though, believes in buying the value of a company and not its stock price. He buys value at the right price, he doesn’t speculate or gamble. He makes sure that he knows a company’s value and that it will far outweigh the price that he paid for, and that is how he sticks to rule No.1.
2. “You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.” Warren is a patient man. He would never chase prices or force any investment. He waits for the right moment (dictated by either price or market condition) to pounce, and pounce he will. This requires a great deal of discipline, and that is what separates him from the majority of unsuccessful investors. Indeed, patience is a virtue.
3. “Never invest in a business you can’t understand.” This Warren Buffet quote is probably an offshoot of rule No.1. He will only play a game that he is really great at to ensure that his chances of losing are slim. Understanding a business really well can help you smell trouble from miles away. Also, you can never have conviction in something you do not understand, and conviction is what enables you to pounce on a company when the time is right.
4. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Warren would always put more value in a great company with great products and management than a mediocre one that can be bought on the cheap. A company’s stock price moves with the whims and emotions of traders and speculators, and is never a good indicator of value. Never mind Wall Street, focus on Main Street and look for a great company that brings great value to its customers, investors, and industry.
5. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” This is a great criterion in choosing a company to buy. Only buy stock in a company that will thrive, grow, and excel in the foreseeable future regardless of stock price. I only know one kind of company that fits that description, and that is the great kind.
6. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” Warren knows that the stock market is full of folly. He knows that emotions like hope, greed, and fear dictate stock prices rather than logic and value. When people are panicky or fearful (as in a bear market) he takes that chance to buy great companies at cheap prices. As long as he does his research and knows the real value behind a company, he doesn’t get scared of its price fluctuations.
7. “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.” This Warren Buffet quote shows his humility and his infinite thirst for learning and improvement. He doesn’t have a huge ego; he doesn’t think of himself as superior than anybody else out there. Nor does he think that he knows everything.
8. “Our favorite holding period is forever.” Warren plays for keeps. He doesn’t buy a company that he wouldn’t hold or manage until a very long time. Making amazing gains, like his, takes time. Start young and go for the homeruns.
9. “Only when you combine sound intellect with emotional discipline do you get rational behavior.” Investors need these two ingredients to successfully parlay the investment game. The sound intellect comes from doing your homework. It is your research and analysis of a company’s business and value. Discipline on the other hand, refers to your ability to wait for the proper price to enter. You shouldn’t chase prices in bull markets and you shouldn’t get scared in bears. Practice emotional discipline and take your investing to the next level.
10. “Without passion, you don’t have energy. Without energy, you have nothing.” Be passionate in what you do and do what you are passionate about. Passion will make you go to the ends of the earth to see a dream fulfilled. It will be your fuel in your journey. It will make you unstoppable. It will see you through when times get tough, and it will make life so worth living.
So there you go, I hope we could all learn from Warren’s words of inspiration and guidance. His principles are time-tested and proven both in life and in investing. I wish you the best, and may the “Oracle” be with you.
-Wealthlift
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