Retiring Rich: 5 Lessons from Warren Buffett
If you want advice on getting rich and staying that way, you probably can’t do better than taking a leaf out of Warren Buffett’s book. Widely considered the most successful investor of the 20th century, he consistently ranks among the richest people in the world, even topping the list in 2008.
At the age of 83, and after beating prostate cancer, no less, the Oracle of Omaha is still going strong. Just last year, he bought up half of the iconic H.J. Heinz (yes, the ketchup-maker) with 3G Capital’s help, for, oh, just $23.2 billion, and put almost $4 billion into Exxon Mobil. Berkshire Hathaway, a multinational conglomerate holding company worth close to $500 billion, lists him as its Chairman, Chief Executive Officer, and largest shareholder.
Perhaps the most important thing to note is that Buffett isn’t really retired. Not even a little bit. You might want to retire, though, and that’s okay. There’s still a lot you can take away from Buffett’s experiences, and here are five things to start you off.
Stay in the stock market
This basically means that you’ll never retire from investing, and you shouldn’t. The rule is that your capital should stay in the market while you live off the interest.
Buffett believes that business and real estate are some of the strongest stocks you can invest in, because these are things that produce goods and services that people will always want or need. If the business is efficient, its value will continue to increase over time.
Invest in low-cost index mutual funds
Taking the above examples of Buffett buying into H.J. Heinz and Exxon Mobil, you’ll see that the man is a stock picker. He buys large amounts of stock in a very select few companies. And yet he advises that you invest in low-cost index mutual funds, which basically means buying into several companies at once, but at a cheap price. What gives?
This is another take on the Oracle’s advice on knowing your stock before buying it. Studying and learning about a huge business that you might possibly buy into takes a lot of work, and not everyone has the time, resources, and smarts to do it. Buffett does. That’s why he’s so successful.
Clearly, you are no Warren Buffett if you’re even reading this. That’s why the smart thing for you to do is invest in a wide portfolio that won’t eat away at your capital (because of trading expenses), but will slowly and surely grow in value over time. You won’t get rich quick doing this, but if you start early and stick it out, you will retire rich.
Don’t get your emotions involved
Another famous Buffett advice is to keep your cool. Not in those exact words, mind you, but rather that you shouldn’t get spooked out of the market when things look bad, or jump in when things look bright.
His adage of being fearful when others are greedy and greedy when others are fearful simply means keeping your emotions in check and seeing the facts: take advantage of what others are missing out on when emotions cloud their vision.
The value of goods and services produced by companies, and by extension the companies themselves, rise inevitably over time. The key is to forget market euphoria and focus on the long-term profits.
Don’t get your hopes up
Investing is not the place to get rich quick, especially if you’re new to it. Your profits will only be equal to the investments you make, and what the business you invest in makes in profits. Some people will win, and some will lose.
Leave some to your children, and the rest to charity
In 2006, Buffett announced that 83% of his enormous fortune would go the Bill and Melinda Gates Foundation to fund education and health projects. If he wanted to, he said, he could hire 10,000 people to paint his portrait everyday for the rest of his life. The problem is that he would be keeping them from making progress in the things that matter, like science and education.
Buffett has also said that you should only leave enough money so that your children can feel that they can do anything, but not so much that they can do nothing.
Local billionaire Vincent Tan of Berjaya Group is also a good example. He has signed the Giving Pledge, to which he promises to donate half his wealth.
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