Investment Tips from America’s Wealthy

Financial insights from the country’s most successful investors.

09/02/2014

When it comes to investing your money, you want to take the necessary steps that will give you the biggest return for an acceptable amount of risk. For some of the best advice, it only makes sense to seek out tips from the individuals who successfully made their millions on good investments. Here are some tips from the wealthy to help you get started.

Investment Tips from America’s WealthyCharles “Charlie” Munger, vice chairman at Berkshire Hathaway Inc., a multinational conglomerate holding company based in Omaha, Nebraska, is also known as Warren Buffet’s right-hand man and is listed as number 408 in the United States on Forbes’ list of billionaires. Known as a world-class billionaire investor, Munger shared some of his investment wisdom on DailyFinance.com. These tips, when built into your own financial plan, could have some very lucrative results: 
1.) Spend less than you make. Always make a point to build your savings and put them in a tax-deferred account that will eventually develop into something substantial. Also, in order to properly invest, it’s crucial to spend less than you earn. Everyone has to start from scratch; “even lousy investing beats not investing at all.”
 
2.) Avoid getting yourself into debt. Once you get into debt, it’s extremely difficult to get out, even when investing. The long-run annualized returns from stock investments is on average around eight to 10 percent; compared to the 13 percent or higher interest rates that many credit cards charge, it’s clear that paying off any credit card bills regularly is extremely important.
 
3.) View your stocks as an ownership of the business. Determine the staying quality of the business in terms of its competitive advantages. “Look for more value in terms of discounted future cash flow than you are paying for. Move only when you have an advantage.” 
There is unfortunately no perfect formula that will result in immediate wealth; however, heeding the advice and practicing the tactics of the super-rich is worth every penny. Here are three tips from the Wall Street Journal that can add more green to your stock portfolio: 
  • Don’t focus on performance as much as risk. Although many investors draw a parallel between performance and the increased value of their portfolio, adding diversity to your stock can have more advantages. Diversifying with equities, real estate, company stock, cash and bonds can mitigate the risk in any one sector and your opportunities for growth will remain strong, even if certain sectors fall behind. 
  • Cash will always be ‘king’. Make sure you have enough cash saved away to withstand economic droughts; don’t dip into your portfolio of equities that may be losing money. Take advantage of strategic buying opportunities when certain sectors offer bargain opportunities. 
  • Never give up. Sell equities for investment reasons, not out of fear about the current state of the market. A portfolio that is properly constructed should help you reach both your short- and long-term goals, so avoid impulse selling out of fear. 
Although many may wish to believe that the most successful investors in the country have secrets up their sleeve or extraordinary abilities that contributed to their inordinate success, it’s often just a matter of combining strong work ethic with intelligence. According to MoneyCrashers.com, many of America’s wealthiest individuals share similar traits that have led to their success, such as:
 
Action: To become wealthy, you have to take action to change your circumstances: expand your abilities, increase your professional experience and seek out new challenges. “The majority of people fail to achieve their financial goals because they waste their time and energy chasing rainbows, seeking shortcuts and hoping for good fortune.”
 
Discipline: Good spending and saving habits that are developed early will benefit you for the rest of your life. By disciplining yourself to not only reign in your spending, but also save is critical to financial stability. Maintain a standard of living that is below your income; wait to buy a new car, put off that luxury vacation another year or two, etc. “Warren Buffett, perhaps the greatest stock investor of all time and a consistent member of the world’s richest individuals, continues to live in the house he bought in 1958 for $31,500.”
 
Knowledge: Investing involves a game of choice versus consequence. Having the knowledge to make educated choices, while weighing the consequences, will likely lead to greater success.
 
Persistence: Investing your money is more like a rollercoaster than a smooth road; you will encounter success and failure, but the key is being patient and not giving in when things look rough.
 
 “Most people give up just when they’re about to achieve success…They quit on the one-yard line,” according to Ross Perot. “They give up at the last minute of the game one foot from a winning touchdown.”

Every individual has the ability and the opportunity to be financially successful. Using the right strategies and maintaining the right frame of mind can help you get there. The country’s wealthiest are just examples of this truth.
 

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