How to be like Buffett How did the investor become the third-richest man on earth? With very a disciplined approach to money. Here's what we can all learn from the Oracle of Omaha.
1. Think like an entrepreneur
Buffett filed his first tax return at 13. Even as a child, he was always looking for opportunities to earn, beginning with a paper route and selling soda and gum door-to-door.
2. Live below your means
When he's "not feeling prosperous," Buffett chooses a $2.95 McDonald's breakfast instead of a $3.17 one. You don't have to go that far, but spending less than you earn is a really good idea, if you can manage it.
3. Love compounding
Buffett tells the story of a man who bankrupts a king by asking for one grain of wheat on the first square of a chessboard, 2 on the second, 4 on the third, and so on. Buffett loves the way compounding makes investments grow exponentially.
4. Learn all you can
He spends most of his time reading, learning everything there is to know about the markets and companies he invests in. The more you know, the smarter choices you can make.
5. Look for bargains
He built wealth by finding companies that were undervalued by the market. Buying assets for less than they're worth and holding on to them until prices rise is a great way to get rich. But it takes study to spot these gems.
6. Think (very) long term
One rarely discussed secret to Buffett's success is that he buys quality stocks and holds them for a l-o-o-o-n-g time. He still hasn't sold the stake in American Express he acquired in the 1960s, for example.
7. Don't buy until you're sure
Unlike baseball, in which a strike may be called even if you don't swing, investing is a "zero forced strike" game, Buffett says. So don't get pushed into making an investment before you're really sure it's right.
8. Don't follow the herd If you do what everyone else does, you'll get the same results they do.
Buffett tells investors to be "fearful when others are greedy and greedy when others are fearful." In other words, the day after a stock market crash is a smart time to buy.
9. Safety first Buffett's investing Rule No. 1 is "Never lose money." No. 2 is "Never forget rule No. 1."
He means: Don't take big risks looking for big rewards. Pick sound investments, and hold them long term. That's what made him a billionaire.