Model Your Way to Riches

Wednesday, November 11th, 2009 By

Find your model

New York Stock Exchange (photo: flickr.com)

New York Stock Exchange (photo: flickr.com)

It has often been said that if you want to get good at something find someone who’s already doing it, and do what they do. If you can learn to think like they do, that’s even better. If your area of interest is investing and wealth building, there’s no better person to model after than Warren Buffet.

Warren Buffet is by far the most successful individual investor in the history of investing. So, how do you gain access to the man, his mind, and his method? You can find a number of good books online, but here are some highlights.

Think of investing as your job

Many people approach investing in stocks as a hobby or a scheme. But the key, according to Buffet, is to investing as seriously as if it were your main job. You wouldn’t take dangerous risks with your main source of income, so don’t do it when you invest, either.

Too many investors want to get in, get rich, and get out quickly.  This leads to mistakes and unnecessary gambles. Act as though you are the owner of a business or as though your investing decisions are your main source of income.  This will lead to longer-term and more profitable investments.

Concentrate on the best

With businesses falling off big board left and right, it’s tempting to spread your investments out against the perceived risk, using mutual funds to diversify and protect yourself from the losses of any one company.  According to Buffet, this can be a big mistake. His approach is to focus on the interaction between you and the companies you invest in.

If you have done your homework, you will have a gut feeling for the companies you are comfortable with and those you aren’t. Stick with the companies that are best for you rather than investing your dollars into companies that are your 10th, 20th, or 100th choices. You’ll be better off in the long run.  And by the way, Warren Buffet never invests in mutual funds.

Keep your eye on the prize

This bit of advice might seem contrary to doing your homework, but Buffet suggests never listening to market forecasts. What he’s talking about are generalized forecasts that make sweeping predictions about the overall stock-market.  These generic forecasts tend to be useless. Choose the particular targets that are right for you. When the time and price are right for you, strike no matter what the forecasters are saying.

The bottom line is drawn by you

The pattern for success is easy to follow. Find someone who is doing what you want to do and then learn to act and think like they do. You need to have confidence in yourself to take your investment activities seriously. You have to concentrate on what you think are the right targets for you. Finally, trusting your own hard work and research, you have to strike when you think the time is right. Only you can establish the bottom line for your success. But when in doubt, it’s still okay to ask yourself this question: “What would Warren Buffet do?”

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This post has 2 comments

  1. Franrose says:

    Great tips on investing! As a matter of fact, like everyone else, renowned investor Warren Buffett had a pretty bad year in 2008, losing 9.6 percent of his company's value. Just like every hungry investor, Buffet has made mistakes in his victorious career. He is human after all. Nonetheless, Warren Buffett is a great investor and a very successful money maker because he continues to trust his instincts and his judgments, although sometimes he may be wrong. I am not an investor but I definitely know that successful investments in not always a 100 percent guaranteed find. It takes a lot of practice, consistency, and understanding. Make your calls and throw your shots. Don't always listen to market forecasts. Like Warren Buffett once said, "When investing, pessimism is your friend, euphoria the enemy."

  2. supra shoes says:

    This is a great piece. Very thought provoking. I like the sort of ending that leaves it opn to personal input.

    Makes it work for just about everyone I think. Nicely done! I’ll subscribe.

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