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Value Investing Tips From Warren Buffett On His Retirement

28 Feb 2020

The king has decided to step down from the throne! The King of value investing and stock market analysis, Warren Buffett, has decided to retire. If you are even closely aware about stock markets or the richest people in the world, then the name Warren Buffett definitely does not need an introduction.

He is popularly known as “Oracle of Omaha” and is recognized as the greatest investor of all time. He is a disciplined investor and usually follows a conservative approach towards investing.

In his recent letter written by him to his company, Berkshire Hathaway’s shareholders, he mentioned that he along with his partner Charlie Munger, are planning to retire. This letter spread like wildfire and broke the internet in the stock markets circles across the world. Buffett currently at the age of 89 years has finally announced his retirement.

Though it is next to impossible to copy the trading strategies followed by Buffet and to do the same in-depth analysis as him, we are listing down the top five investing tips which helped Warren Buffett earn the title of legendary investor.

1) There Can Be No Replacement For Cash

Cash is very important according to Buffett and one must always maintain sufficient amount of it. Cash not only helps you in sustaining unpredictable losses but also helps in acquiring new opportunities.

According to Warren Buffet, people suffer in their lives many times because they do not maintain cash with them. It is always necessary to maintain an emergency fund and, keep your trading account funded, so that you don’t ever miss an opportunity.

2) Be Fearful When Others Are Greedy

You must have heard about this famous phrase from Buffet, “Be fearful when others are greedy, and greedy when others are fearful.”

It means that you should always avoid the stocks which everyone is buying or trading, because they may be overvalued. Instead, you should look out for stocks which finds less buyers, Study the fundamentals of those stocks, and invest if everything looks on track.

3) The Importance of Dividends

Dividends are a great way to understand about the company’s finances. If a company is regularly paying out dividends, it means that the finances of that company are in good shape and therefore the company is paying out its shareholders.

Buffett usually invests in companies that have a prolonged history of yielding investments. You might have heard recently that Warren Buffett announced that his holdings in The Coca Cola company are soon going to yield dividend which are greater than what he initially invested in the stocks of that company. Now this is known as a great return, isn’t it?

4) Make Undervalued Stocks Your Friend

Warren Buffett usually invests in undervalued stocks, which he values basically on the basis of their intrinsic values.

This is usually done by comparing the company to the other companies of the sector and analyzing various parameters including return on equities, operating margins and debt health.

Also, he advises that it is always better to avoid stocks which belong to any such sector, for which you have no understanding. For reference, he himself avoids stocks belonging to the technology sector.

5) Long-Term Is The Key To Success

Warren Buffets is known to hold his positions and holdings for a long period of time. In fact, his 99 percent capital as of now is invested in stocks. He says that he usually buys stocks to hold them forever. There are various stocks with him, which he has probably held for over 20 years!

As per Buffett, it is always beneficial to invest and not trade. Also, you should wait for the right price to enter in your preferred stock. Buffett himself is having a list of hundreds of companies which he wants to invest in, but is still waiting for the right price to enter.

He invested a lot in the recession period when the stock prices were falling drastically, which in turn helped in gaining huge returns in the subsequent years when the market balanced.

These are some of the strategies from the all-time great investor, Warren Buffett which can help you in investing. But one should keep in mind that the stock market is full of risks. It is not necessary that you always gain on your trades. But following certain rules and strategies can surely help in increasing your success ratio. Buffett may be retiring but his strategies will surely continue to help investors for many years to come.

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