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Buffett has said that he doesnt advocate for extreme frugality.
But he does think its crazy to spend more than you make.
Thats OK. Just be mindful of how much value you get from feeling rich vs. being rich.
Market fluctuations present good investment opportunities, butBuffett says to buck the trends.
He illustrated that point with a real estate analogy in his2013 letterto Berkshire Hathaway shareholders.
Cash Loses Value
Today, people who hold cash equivalents feel comfortable.
That year signaled the beginning of the mortgage crisis that sent markets reeling and triggered the Great Recession.
Cash seems safe when the markets are uncertain, but its guaranteed to lose value due to inflation.
Historically, the opposite is true ofstocks over the long term.
Focus On Long-Term Growth
I never attempt to make money on the stock market.
Buffett often has said he doesnt know what prices will do in the short term.
Buffett looks for companies that would continue to thrive even if the market shut down for five years.
Invest In What You Understand
The investor of today does not profit from yesterdays growth.
Investors are familiar with the prospectus disclaimer warning them that the investments past performance doesnt guarantee future results.
Buffett takes that to heart.
So, what does he look for?
A first-class business with a strong competitive advantage and economics he understands.
That last point is vital.
Your limitations in knowledge serve as a perimeter that gives you a margin of safety, Buffett said.
Keep doing that and, despite setbacks, youll almost certainly succeed.
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