8 Tips for Thinking Like Buffett, Part 1

Sure, the man we consider the premier investor of our time has lost billions in this recession. But it’s a recession. Everyone’s going to lose money. And even though he has lost several billion dollars, he’s still got $37 billion, and the only guy in the world that is richer is Bill Gates. Clearly, there are things that we can learn from the “Oracle of Omaha.”

Lucky for us, Investopedia took eight valuable tips from the book The Warren Buffett Portfolio and offers them to the world. Here are the first 4 of the 8 tips for thinking like Warren Buffett as you make investing decisions:

1. Consider stocks a business: Instead of looking at stocks as part of a game, look at is as a business. Buffett says that if people considered themselves “part owners” of the companies they invest in, they would make more deliberate choices and think things through.
2. Make larger investments: Buffett believes that if you do your homework, and make careful decisions, you can choose solid, fundamentally strong companies that you should feel comfortable putting more money into. Yes, you want some diversification. But Buffett feels there’s such a thing as too much of a good thing.
3. Reduce turnover in your portfolio: Constant buying and selling and trying to time things to “make it big” can result in missed growth, as well as adding up the transaction fees that eat into returns.
4. Don’t rely only on stock prices: Buffett looks at the fundamentals of a company, and its potential growth, before making a decision. If you choose a good investment, the stock price will eventually take care of itself.

Tomorrow we will look at the remaining four tips for investing like Warren Buffet.

Image source: Mark Hirschey via Wikimedia Commons