Invest like Warren Buffet
NOWADAYS, we will see a lot of financial planning contents in the internet. Gen Z’s are entering the workforce together with the Millennials and Gen X. While the Baby Boomers are now retiring, it is very important to put our hard earned money on the right platform and with the right principles.
Here are some investment lessons from the best investor of all time:
1. Invest in what you know. Investing in businesses and industries that we are familiar of will also help us to have informed decisions. It reduces the risk of investing in unfamiliar platforms or businesses which often result in big losses. This can even affect your personal life since our financial decisions will be extended to our family members.
2. Long-term perspective. Buffet is a proponent of a long-term approach to investing. This will allow us to see the bigger horizon of the businesses. If a company has a strong competitive advantage in a specific industry, we can have an assurance that it will perform well in the long run. If you are now investing for the long term, you will be able to segmentize your strategies in the following:
a. Diversification. Spread your investments across different asset classes and sectors.
b. Portfolio review. If you are investing for the next 20 years timeline, periodically you can review your portfolio to ensure it aligns with your goal and risk tolerance as this may change depending on your life season. For example, if you are married or if you have kids that are dependent to you, you need to balance out the risk that you are taking and your immediate responsibilities.
c. Staying disciplined and avoiding market noise. Stick to your long term strategy and avoid being emotional at times that the market is volatile, remember that investing is a long term journey and short term fluctuations are part of the process.
3. Value investing. This involves buying and trading stocks that are trading below intrinsic value. This approach are both popularized by Benjamin Graham and Warren Buffet, here are some key principles that we can learn from them.
a. Margin of safety. Value investors are always looking out for margin of safety, which means buying a stock if it significantly fall below its intrinsic value. This provides cushion against potential losses if the stock price were to decline.
b. Focus on fundamentals. If you’re a value investor, you will always look at a company’s earnings, assets and cash flow. Reviewing the financial statement of a company will give us a picture of what’s happening inside and even allow us to check the long term effect of effective management to the company.
Now if you are still thinking of starting your first investment before you can apply these principles, you need to start with the following steps:
a. Set clear financial goals. Determine the reason or purpose of why you would like to invest. Are you saving for your retirement, first house purchase, child’s education or future travel goals?
b. Create a budget. Before investing, make sure that you are budgeting your cash inflow and outflow, we only recommend investing a portion of your excess money to ensure that there’s balance between your daily needs and your future needs without compromising either of the two.
c. Start small. Consider that all big investments start with a small amount, if you do this consistently, it will become significant in the long run and will have a long term effect to your next generation.
d. Seek professional advice. Consider consulting a banking, insurance or financial service professional to guide you if you are really taking this seriously. They can help you on which specific platform will suit you and they can give you a roadmap to avoid confusion on which step you will take.
To wrap up this column, I would like to share a lesson that I’ve learned in my 11 years of working and hearing stories of people. Investing is not just about getting rich quick but it’s about having discipline in your finances. It’s learning to live on less than we make, because even if we have good income and if our expenses exceed the former, we will always feel that we are in lack. The goal isn’t more money, it is living in your terms.
Karlo Biglang-awa, RFP, is a seasoned professional with 11 years of diverse experience spanning the Financial Services and Real Estate industries. With expertise in Financial Advisory, Insurance, Insuretech, Digital Banking, Real Estate Operations Audit, Business Analysis, and Sales, Karlo has consistently demonstrated a keen eye for detail and a strategic mindset. His proficiency in navigating complex landscapes, coupled with his commitment to excellence, has enabled him to drive success in each role he undertakes.
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