If there was someone in Stock investing that majority would follow, that would be Warren Buffet! He’s the best stock investor of all time and has been the best success stories you’ll ever come across in investing. Berkshire Hathaway is where he and Charlie Munger made history transforming a small textile mill into one of the world’s biggest holding firms. It is also said that he follows 10 rules to riches which supposedly made him the success that he is today, so here it is:
I’ve been reading thru Warren Buffet’s 10 rules to riches when I noticed that I pretty much violated most of his rules (no wonder I’m nowhere his net worth lol!). The good thing is that I know what it is I violated and I believe I know myself better in investing and entrepreneurship.
The only 2 Warren Buffet rules to riches I did not violate was:
- Reinvesting Profits - I always reinvested my profits, I always believed to make something bigger whether business or stocks, you need to reinvest what you earned. However tempting it could be to take it out and use it, I always thought about how much bigger I could earn with a bigger capital right?
- Limit what you Borrow – I never believed in leveraging, as much as possible, I’d like to keep myself afloat by not spending money I don’t have. So I kept what I earned to invest into what I believe in, I’d rather grow slower and reinvest my profits than over leverage and lose everything.
Now, here are Warren Buffet’s 8 rules to riches that I’ve violated!
- Be willing to be different – Sometimes it’s easy to just follow everyone, especially in stock investing. Hearing a rumor that a stock has something that would raise the price, I’d be so tempted to jump that I made bigger loses. It is just so difficult to go against the crowd sometimes, but I now that I’ve started getting a grip and more experience I believe I can do something with this in the near future.
- Never Suck your Thumb – I’m guilty! I sucked my thumb so many times, I did not gather enough information and made a lot of bad decisions. I’m starting to learn to do my homework now and one key thing I learned is to find a way to make this more efficient and so I did. Opening an account with ColFinancial to do faster fundamental research and reading charts to make my decision faster.
- Spell out the deal before you start - Now I don’t know if this is how I understand it, but I sometimes I do get into stocks not knowing what my upside will be and what my risk reward ratio is. This is something I’m working on but I saw myself getting impatient especially when I’m looking to invest and wanting to buy into dips without thinking where it’s going to go and just blindly jumping on it.
- Watch Small Expenses- Small expenses for me was the trading fees and other fees in trading, I simply noticed that my small expenses have led to a large loss in my portfolio. It doesn’t seem much at first but together they add up a big chunk.
- Be Persistent- Sometimes the smallest loss triggers me to go and sell, instead of believing in myself and my plan. But I’m starting to learn persistence and learning to stay by my plan, and now I’m starting to reap the benefits of earning from stock trading / investing.
- Know when to quit- Fear and Greed is really our biggest enemy. When I was making profits, I did get so greedy on certain stocks and wanting to kept going until it went on a U-turn and started to fall (I suffered losses with this). When I made losses, there were times I was optimistic and didn’t know when to cut loss (even if I planned a 5% cut loss) and guess what more losses!
- Assess the Risk – I didn’t check my risk reward ratio, I did get into stocks not knowing what my reward is but what’s worse is not knowing my risks! I suffered losses that were beyond the upside that I could’ve gotten with the stock. Again I’m doing what I can to remedy by doing my homework now.
- Know what Success really means – Success isn’t just about profits, that’s one thing I’ve learned. Success is more than that, it is being able to do what I want with my life and profit with it. I’m starting to learn to appreciate that money buys me time.