Warren Buffett – The “Non Trader” Trader
Warren Buffett is not a trader. In fact, he has advised people to avoid trading for many years. He is an investor who buys companies and stocks and then holds them for many years. In fact, he has owned Coca Cola (NYSE: KO) for more than 20 years. He has for decades avoided Wall Street. However, for traders, there is a lot you can learn from Buffet. In this article, I will look at five valuable lessons you can learn from Warren who is the second richest man on earth.
#1 – Need for a Strategy
The first lesson you can learn from Warren is on the need to have a strategy. A trader who pretends to know everything is always wrong and chances are that they will end up losing a lot of money. For more than 50 years, Buffet has always had a strategy for his investment. His strategy is based on the need to buy companies that are well managed and at a cheap price. He buys large stakes and at times, the largest stake. As a trader, you need to have a strategy to follow for all your trades. The strategy must not always be similar to what another person uses. You can define your own strategy and implement it.
#2 – Right Hand Man
The next strategy that has made Buffet wildly successful is his right-hand man. Charlie Munger has been Warren Buffet’s companion for decades. He has always been there when he is making major decisions. In fact, many have argued that Buffet would not be the man he is today if it were not for Munger. A common saying advises people against being lone rangers. It advises them to combine efforts and make better decisions. Two hands are better than one. As a trader, it is important to have a right-hand person especially if you are doing it on a full-time basis. If your life depends on trading, then you should get someone to help you with the analysis. The person should be invested in the trading as well.
#3 – Role of a Mentor
Warren Buffett has talked about how his professor, Benjamin Graham influenced him to start investment. Graham was a leading scholar who had studied the market for years. His book, the intelligent investor is one of the best-selling business books of all time. I have read it twice. Warren became friends with him and guided him early in his career. As a trader, having a mentor can play an important role in your career. It can help you avoid simple mistakes that would otherwise cost you thousands of dollars. A mentor should someone who has traded for years.
#4 – Staying Humble
If you are a successful trader, chances are that you will make a lot of money. If you follow the rules, you will be a wealthy man while you are still very young. However, you will start getting broke when you start showing off your wealth. Warren is the best example of this. Even though he is the richest man on earth, he still lives in a small 3-bedroom house. He does not own private jets and yachts. You will never see him show off. He understands that pride comes before a fall.
#5 – Give Back
One of the things that successful people do is that they give back. Warren Buffet has committed to give billons of dollars to charity. The same is true among most of the billionaires in the Forbes list. They understand that by helping the less fortunate, they are actually helping themselves. As you become a successful trader, you should purpose to become a change agent in the society by giving back.