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Here are his top four tips for everyday investors who want to choose the right investments.
Invest in Good Businesses
Buffett isnt the kind of go-go-go investor Hollywood likes to profile.
He doesnt buy low, sell high, and buy low again before lunch.
Charlie [Munger] and I are not stock-pickers; we are business-pickers.
As Buffetts business partner for nearly 50 years, Munger was instrumental in helping Buffett identify good deals.
Although the value of his investments had dropped along with the market, he didnt worry.
He even used his purchasing power to buy more of certain stocks.
Of course, Buffett knows that not every low-priced stock is a good value.
Finding those valuable purchases requires research and a commitment to finding good companies, not just cheap stocks.
As long as you invest in businesses you understand, he says, youre on the right track.
You only have to be able to evaluate companies within your circle of competence.
The size of that circle is not very important.
Knowing its boundaries, however, is vital.
Avoiding an investment you dont understand can be just as valuable as saying yes to one you do.
Trust Low-Cost Index Funds
Buffett picks his stocks because he knows the business.
He also knows that not everyone is an expert, so he recommends low-cost index funds to most non-professionals.
Hes said it in no uncertain terms multiple times.
He said it again in 2013.
A low-cost S&P 500 index fund will achieve this goal.
The S&P 500 tracks the 500 highest-valued equities in the U.S. market.
S&P index funds divide investments among those stocks, each in a different way.
Hold Stocks Long Term
Warren Buffett plays the long game.
Buffett trusts the markets long-term growth, including indices like the S&P 500.
In short, if you want to invest like Buffett, buckle in for the long haul.
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