Warren Buffett Investment Tips

When you start looking at investments and what it takes to be an investor, there are a few things to consider before you ever invest in any asset or product.  The first steps we have covered in the page titled “what is your risk tolerance?” If you haven’t read that post, we highly recommend reading it before you continue with the information in this post.

Once you have covered your tolerance for risk and know your strategy with an associated asset class that interests you, then you want to look at the market place and specific industry your assets may belong to.

So how do you select a good investment and feel comfortable with the investment decision?

We will start by taking a look at a couple of Warren Buffet investment tips.  He has said it best, he doesn’t invest in anything that he does not understand.

He has also said, rule number one to investing is to NOT LOSE your money. This choice of self-discipline has made him billions of dollars in his investing career.

Despite his investing success one may ask the question, has he lost out on numerous lucrative opportunities because of this approach?  The answer is yes of course he has; however, it hasn’t led him astray from generating profits and reducing his risk as an investor for over 50 years.  If it works for him, it can work for you too and we can say that it has worked very well for us over the years as well.

Avoiding the distractions

I don’t know how many times we have had conversations with other companies or business owners/investors and heard about some great investment they are involved in.  They pitch it to you like they are trying to sell it and then say to you…” you have to get in on this before you miss out!”  Have you ever had this happen to you?

It’s what we call FOMO or “fear of missing out” syndrome.  We have seen this recently with the Crypto market towards the end of 2017 when Bitcoin skyrocketed to almost 20,000.00 a coin.

People were in fear of missing out, so more and more cash came flooding into Bitcoin because of the physiological emotions that people were feeling at that time.

It sounded very exciting with high reward and low risk at the time because how could you lose right?  I mean Bitcoin was just going to keep going higher and higher right?

That’s the exact mindset that led people to invest in Bitcoin who knew nothing about how bitcoin works, the technology behind it and where it was in the innovation phase within the Crypto market.

So, the point here is that sometimes euphoria can be a distraction for investors.  It can lead retail investors into the wrong market place and ultimately the wrong investment for them causing massive financial losses in the end.

Our observation with the masses and the crypto craze

What was interesting about the bitcoin euphoria that investors were getting distracted by, was that we had been invested in Bitcoin long before Bitcoin started it’s rise.  We were invested when Bitcoin was around 1,200.00 a coin.

Around the time Bitcoin hit 10,000.00 a coin, we had folks who we did not know us or that we had not dealt with in years asking for advice.

They were asking how to get involved with Bitcoin and what we thought of it.  The truth is that most of these people were just looking for the next big thing to make a quick buck on.  They were people who really didn’t see the potential in blockchain technology.

They didn’t know anything about Bitcoin and all they cared about was a quick hand out, so they could throw money at it and make a killing like everyone else was doing.  So, what happened to these people that were investing in the crypto craze just for a quick profit?

We witnessed one of the largest crashes in the history of markets ever, take hold over the next 8 months.  We witnessed many people who jumped on the “crypto craze” band wagon right at the top of Bitcoins rise, only to lose massive amounts of cash when they panicked and sold for losses as Bitcoin dropped in price dramatically. From 01/2018 to the current moment we are writing this 08/12/2018, Bitcoin has dropped in price from it’s all time high a whopping 68%.

Investors circle of interest

It’s this type of approach to investing, that we can tell you first hand from observations of what others were doing with the crypto craze, that will GUARANTEE you massive losses.  The reason is simple, it goes back to what we were talking about regarding, knowing your circle of competence.

If you invest in things you don’t understand then as an investor you are more susceptible to taking on higher RISK.  You will lack the self-discipline of naturally being interested in the investment or tracking its progress over the long term.

If it’s outside your circle of interest you could POTENTIALLY end up just like folks that invested in Bitcoin at it’s all time high, only to suffer massive losses later.

This does not mean that you can’t get lucky and hit a jackpot.  What we are saying is it’s probably the best way to set yourself up for losing money. Stay within your circle of interest and you have much better odds of making money and avoiding heavy losses.

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