Warren Buffet is one of the wealthiest individuals alive, unquestionably. At an estimated worth of over £50 billion (that is £50,000,000,000!) he knows a thing or two about money. Accordingly, we keep our ears pealed when Warren speaks to try and take any of his knowledge and apply it to our clients’ lives as well as ours. We are incredibly lucky to have access to the way that Buffet thanks to the internet.
Without the internet our lives would be much harder – the information available today is unrivalled. It is now up to you and I to make sure we use it to serve a purpose like listening to experts such as Buffet. As your IFA in London – we want the very best for your finances. We are always learning and people like Warren are perfect to take lessons from. Let’s bask in one right now.
There are not many better people to take advice from given Buffet’s unfathomable track record. Much of his success has come through making brilliant investments. Who better to base an investment model on that one of the richest investors of our era? We can’t think of many better.
We will write more about Buffet down the line as he has such an incredible history. However, for today, we wanted to focus on his number one rule for investing. It’s a beautiful rule and it is something you can implement in your own life. The best part about this rule is that you can put it into practice right now, today.
Why? Because we are all investing all the time. Right now you are investing your time reading this article. Time is always being invested and everyday we are investing time AND money. Warren can help you invest your money right now, today, with his rule. In turn, this should help you think about the way you are investing your time on a daily basis too.
So what exactly is this magnificent rule? No, it is not “invest in crypto while it is hot! That is the future!” It is much more simple and to the point than that.
What’s the rule?
The rule is: never lose money. That is the rule, the number one rule.
“But what has that got to do with investing?!” You ask. And you would have a point to ask that question.
“How did Buffet make £50 billion? Just by not losing money?! You can’t ‘not lose’ your way to £50 billion!”
That is true. However, this is the approach he takes to investing money (and we would guess time, too) every single day. This goes for tiny little daily expenditures all the way through to large multi-million or multi-billion pound investments.
So, again, the rule is to never lose money. Never lose money!
The way we have interpreted this rule is that if you are always losing money… Well, you can never invest in the things that actually count. You never have the chance to invest your money in the right things.
Further to the above point – if you ‘lose’ money (instead of use money) you will never get that money back ever again. That money is lost.
This sounds simple but let’s illustrate this point by looking at what constitutes as losing money.
Buying something that does not make you more money, either directly or indirectly is losing money.
Buying new curtains for your home despite the current curtains being adequate would count as losing money. Yes, the curtains look great, but nothing can really be gained from the curtains in terms of money. This money has been lost.
Another example could be upgrading your car when your car is completely reliable and does not break down. Your monthly repayments have gone from £250 a month to £650 a month for no added benefit other than looking cooler. This money cannot be regained through the car (as such) and therefore the excess money (£400/mo) has been lost.
Two examples of using (rather than losing) money are as followed:
Having a home – you need a roof to sleep under so that you are secure, well rested and ready to work the next day. Yes, you have spent money, but you have not lost money. Your expense allows you to sleep adequately and be refreshed ready for the next day.
Buying black out curtains – so, in a reverse scenario, you buy blackout curtains for your home. You have been struggling to sleep because you have streetlights right outside your property. You buy the blackout curtains so that you can sleep better and not be woken up all night by the lights. This would be spending money and using it rather than losing it.
So as you can see – Buffet is saying to use money on things that will make us more money. He has obviously taken this to an extreme length having got to the position he is in, but we can all learn from his advice. We suppose the premise is that buying those ‘nice’ curtains is fine, but not while you do not have enough resources to do it without caring about the £50 or however much they cost.
Even if you follow his rule to a small degree and lose less money, this will be a great step for you. You can then use the money you have left over to make more money! Listen to Warren Buffett’s investment advice if you want your money to work for you. There is information all over the internet but hopefully you can start to use this golden piece of advice.
As for large investments – the same rule stands. He did not blindly throw all his money into crypto as he does not know if it will work. He invests into things with people he knows and trusts and things he knows about. Invest like Warren and don’t lose money!