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Warren Buffett’s Advice To The Small Investor

One of the world’s richest men – Warren Buffett, 83, a billionaire investor and Chairman of one of the most valuable companies in the world, has a simple message for ordinary stock investors looking to grow their pension/retirement fund.

Known as the Oracle of Omaha (He still lives in the same house he bought with his late wife over 60 years ago), Buffet warns investors against an common mistake made by those keen on cashing in on stock price movements.

He tells them they shouldn’t try to ‘time the market’ and it’s foolish to try to predict or pay attention to those who forecast the short term movement of the stock market.

He also cautioned against ‘flipping’ stocks like some traders do. The best long term strategy for the novice investor is to buy shares in index fund that follows a particular sector or the stock market as a whole.

Look for good solid businesses that you understand.

Speaking to USA Today, he said “you don’t need to look at the prices of the stocks you own from week-to-week, or month-to-month, or even year-to-year. If you own a cross-section of businesses, and you don’t get excited (and buy) just at the very top, and if you buy in over time, you are going to do well.”

Buffett’s own simple philosophy has made him one of the richest men in the world. He buys into solid businesses that he can easily understand and holds onto those shares for a very long time and never listens to what the market is doing at any particular moment in time.

His most famous analogy of buying stocks is when he talks of his erratic friend called Mr Market – ‘when things are going well he wants to buy from you, so you should sell to him and when things are going bad, he wants to sell to you, so you should buy from him.”

While the ride can be bumpy along the way, those that have a steady hand and stay the course, as he has done will win out in the long run.

He also cautions against paying too much in fees and expenses if you are invested in a managed fund. Why pay an expensive management fee to invest in a mutual fund when super-low-cost index funds that mimic the movements of the large indexes like the FTSE100, the Standard & Poor’s 500-stock index or the NASDAQ are available at much cheaper rates.

Buffett, has a net worth of $58.5 billion, and plans to give it all to the Bill and Melinda Gates Foundation (set up by his bridge partner Bill Gates, founder of Microsoft and worth $72 billion).

To see what his top 10 holdings in shares are click here


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