By James Woolley
Warren Buffett is one of the most successful stock market investors of all time because his long-term returns have been nothing short of incredible. We can learn a lot from him and the way he invests in stocks, and in this article I want to discuss three specific things that you can learn from Warren Buffett.
First of all you should learn how important it is to only invest in high quality stocks. Unlike most traders and investors, Buffett doesn’t tend to invest in start-up companies or high-risk stocks. Instead he generally looks to invest in big market-leading companies that have a long and consistent record of earnings growth and dividend growth.
He is only interested in companies that are at the forefront of their industry and likely to keep on showing growth for many years to come. A classic example of one of these companies that he has invested in in recent years is Tesco. This is the leading UK supermarket that is not only expanding it’s market share in the UK all the time, but also expanding all over the world, so there should be many years of steady growth for this particular stock.
Another lesson you can learn is that patience is everything when investing in shares. He doesn’t worry about dips in the stock market because he isn’t planning on selling his shares any time soon. As long as his chosen companies are still showing steady growth, that is all that matters because eventually the share price will correct itself and reflect this growth in the future.
Finally if you look at the years and years of trading records of Warren Buffett, you will see just how important dividend reinvestment is, and how this has helped his portfolio grow quite substantially over the years. Some people like to bank these dividends, but Buffett has shown just how much of a difference it can make to your long-term wealth if you plough these dividends back into your current investments.
The point is that Warren Buffett did not get rich by accident. He has become one of the richest men in the world by having a sound investing strategy. He simply picks good growth companies that are the leaders in their field and holds on to them for years and years, reinvesting the dividends along the way. He has patience and discipline in abundance. So you could do a lot worse that following a similar investing strategy to the great man if you wish to achieve just a fraction of his success.
About the Author
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