Your Cheat Sheet to Financial Professionals

•   
• By Henry Truc
 
• October 12, 2010

What is a financial professional? The term loosely covers anyone that works in an industry dealing with, well, finance. This could be someone as prominent as a stock broker on Wall Street or someone as common as your local insurance agent or tax accountant. Knowing the area of expertise each one deals with will help you pinpoint the right hire to help you meet your financial goals. After all, you wouldn’t have your insurance representative do your taxes or your CPA accountant picking your stocks.

The following is a simple break down of five of the most common industry professionals working in finance. While some responsibilities do blend together and some professionals do double dip in expertise, this guide should help clarify where each professional fits in the world of finance.

Financial Planner

While their services vary widely, most financial planners review the whole of a client’s monetary situation and devise a strategy for accomplishing their savings, debt and investing goals. They also help serve as an investment manager to plan for major expenditures like retirement, college or a home purchase. They may make recommendations for investment products and services that will assist in achieving these milestones.

Credentials: The most common certification that designates a qualified financial planner is a CFP credential. In order to become a Certified Financial Planner, a person must hold a Bachelors degree, obtain at least three years of financial planning experience, complete a CFP Board-Registered Education Program and pass a three-part, 10-hour exam. Continuing education is required to maintain certification.

Skills:

• Strong interpersonal skills
• Sales ability
• Familiarity with legal restrictions and laws regarding retirement plans, tax shelters, insurance and trusts
• Understanding of complex mathematical concepts, budgets and financial and legal documents

What to Look for: There is no state or federal law that requires a person claiming to be a financial planner to actually be certified. For this reason, you should only hire a professional that has credentials and can provide references.

The CFP Board can be contacted regarding inquiries about particular individuals. In addition to receiving certification, qualified financial planners are registered with the SEC or the state securities commission where the business is located. You should also determine if your financial planner has taken a fiduciary oath to “to act in good faith and in the best interests of the client.” Financial planners are either compensated through fee-only or commission structures.

Financial Analyst

Financial analysts are also known as security analysts or investment analysts. They work for banks, insurance companies, securities firms and other institutions examining financial data to help a company and their clients make investment decisions. The primary duty of most financial analysts is to perform extensive research, write reports and create presentations based on these results to aid in determining the value and appropriate action on investments.

Credentials: It’s recommended that analysts obtain a Masters degree in business administration (MBA) in addition to their Bachelors degree. Analysts may also receive certification by the CFA Institute in the form of a Chartered Financial Analyst designation.

In addition to holding a degree, Chartered Financial Analyst candidates are required to pass three exams that cover topics like accounting, economics and security analysis, and have four years of qualified, professional work experience. CFA charterholders are also obligated to adhere to a strict Code of Ethics and Standards.

Skills:

• Analytical, mathematical and problem-solving skills
• Advanced knowledge of statistical software and spreadsheets
• Ability to communicate complex financial ideas simply
• Motivated to seek out obscure information
• Possesses in-depth knowledge of the economy, tax laws and markets

What to Look For: Financial analysts are generally employed by institutions rather than individual investors, but you may still be interested in who is making recommendations for your portfolio within a firm. The combination of education, experience and success record will determine how qualified a particular analyst is and a designation as a CFA is seen as a key certification for financial analysts.

Accountant

Accountants keep track of money. Most have a specialty: Public accountants work for public accounting companies and do accounting, auditing, tax and consulting work. Management accountants keep track of the money earned and spent by the companies they are employed with. Government accountants ensure sure that government accounting records are correct and review the records of people doing business with the government. You can also find individual accountants to help you with your money records and taxes.

Credentials: A Bachelors degree in accounting is usually the minimum education requirement. Masters degrees in accounting or business with a concentration in accounting are also available. Any accountant that files a report with the Securities and Exchange Commission must be credentialed as a Certified Public Accountant. Obtaining certification as a CPA requires (in 46 states) completion of an extra 30 hours of related undergraduate college coursework.

Skills:

• Knowledge of finance, accounting, budgeting and cost control principles
• Proficiency with financial and accounting software
• Extensive knowledge of federal and state financial regulations
• Ability to analyze financial data and communicate effectively through financial reports, statements and projections

What to Look For: It is not necessary for an accountant to be certified, so any additional professional designation is demonstrative of advanced knowledge in their field. A CPA is probably the most well-known designation, yet many other special certifications may be obtained by accountants depending upon their particular focus. One such example is the Certified Management Accountant title conferred by The Institute of Management Accountants.

Stockbroker

Stockbrokers work privately or for stock brokerage houses. They seek out and assist retail clients, including both corporations and individuals, in determining the best investments based on their interpretation of financial data provided by analysts. They then facilitate the transaction on the client’s behalf. Additionally, stockbrokers develop investment plans for clients, maintain records, monitor transactions and review financial reports.

Credentials: While a college degree is not necessarily required, most stockbrokers have one. Many also pursue MBAs, especially for high-level positions. It is required that they are licensed by passing the General Securities Registered Representative Examination, also known as the Series 7. Many states require stockbrokers to pass the Uniform Securities Agents State Law Examination as well.

Skills:

• Excellent interpersonal and communication skills
• Ability to identify market trends and how they affect investments like stocks or bonds
• Comprehensive understanding of financial health of investments, balance sheets, P/E ratios, etc.
• Recognition skills of unique investment opportunities

What to Look For: Personal qualities and skills are often considered to be even more important than academic training. The track record of the stockbroker is also important. Since they are often entrusted with large sums of money and sensitive information, it is especially important that you trust your stockbroker. Like a financial advisor, you need to determine whether their motivations are dictated by their commission structure or helping you build wealth.

Insurance Agent

Insurance agents are generally the first point of contact between an individual, family or business and an insurance company. They specialize in one or several types of insurance, including life insurance, health insurance and property or home insurance. Insurance agents search for new clients and assist them in selecting an insurance policy. Captive agents work on the behalf of a single company while insurance brokers match the best policy with their client among several insurance companies they represent.

Credentials: The most important aspect of being an insurance agent is sales. Some insurance agents only have a high school education with a proven ability in sales while others obtain a college degree in business, economics or finance. A few schools offer specific Bachelors degrees in the field of insurance. Insurance agents learn most of their skills by shadowing other agents, however. Additionally, most states mandate licensure and ongoing education every two years.

Skills:

• Sales expertise
• Specialized knowledge of particular insurance type
• Aptitude for explaining highly technical concepts
• Ability and desire to stay up-to-date on constantly changing industry and coverage policies

What to Look For: All agents are required to be licensed to sell insurance in whatever state(s) they work. Separate licenses are needed for every type of insurance policy being sold. Most states require that an agent complete coursework and pass an examination before receiving a license. Be sure that any insurance agent you work with holds a license in their particular field, whether it be life, health, auto, property insurance, etc. Agents may also receive additional certification or professional designations by organizations such as The National Alliance for Insurance Education and Research.

You can cut down on a lot of confusion and wasted time by going straight to the professional who meets your financial needs. By above guide to match the appropriate person with what you’re looking for, you should have a good start in finding a qualified industry professional.

http://www.gobankingrates.com/personal-finance/your-cheat-sheet-financial-professionals/

5 Secrets to Investing Success from Warren Buffett’s Annual Meeting

At the recent meeting, Buffett cited the factors that contributed to his success.

My trip to Omaha this past weekend meant only one thing, a chance to listen and learn from two of the greatest investors of all time: Warren Buffett and his second in command, Charlie Munger.

Over five hours, the two fielded questions from shareholders on matters ranging from the state of Berkshire Hathaway to the German economy. But one question really grabbed my attention: What has allowed you to become such a successful investor?

MORE

Warren Buffett Is Wrong About Whole Foods

This Is How Much It Costs to Live Next Door to Warren Buffett

15 Things to Expect from Warren Buffett’s Annual “Woodstock for Capitalists”

In response, Buffett cited the five most important factors that contributed to his success.

1. “Enjoy the game”

MORE

This Is Why Warren Buffet Dumped His Exxon HoldingWarren Buffett on Scorecards, Investing, Friends, and the Family Motto

Practice makes perfect, and the simple truth is that you’re more likely to practice what you love. As Buffett said, he has always been interested in investing — in fact, he bought his first stock at age 11.

2. “A great teacher”The enthusiasm Buffett brings to the company’s annual meeting, and his obvious joy in educating others, makes it clear that 73 years later he still has great passion for investing.

Buffett had the first ingredient down pat, but he didn’t have a clear strategy. That began to take form after he read The Intelligent Investor for the first time in 1949. Buffett eventually attended Columbia Business School where he trained under the legendary value investor, and author of the The Intelligent Investor, Ben Graham.

Buffett’s investment philosophy has developed over time, but one major brushstroke hasn’t, and it is a Graham adage he shared in his 2013 letter to shareholders: “Price is what you pay, value is what you get.”

We can’t all go to Columbia, but we do have access to books written about or by legendary investors, and the opportunity to seek out intelligent people to learn from.

3. “It requires a certain emotional stability.”

Buffett and Munger are extraordinarily rational. They understand prices will rise and fall, and view falling stock prices as an opportunity to buy great businesses for less.

Theoretically, this isn’t difficult to grasp. If the same thing can be purchased at a lower cost, it’s a better deal. Yet when the stock market tumbles, it can be difficult not to panic and sell out.

Munger suggested we should all “avoid being a perfect idiot” in such situations. Which is about the best advice anyone can receive.

4. “Exceptional focus”

In a 2013 article by the Omaha World-Herald, Berkshire investment manager Todd Combs remembered Buffett coming into one of his classes at Columbia. Buffett was asked how the students could prepare for a career in investing. He grabbed a stack of pages of reports and other documents, and replied:

Read 500 pages like this every day. … That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.

If the reading alone doesn’t prove Buffett’s focus, he suggested in his 1993 letter to shareholders, “Indeed, we’ll now settle for one good idea a year.” One big idea and 182,500 pages of reading per year. That’s focus.

5. “Keep yourself open to good accidents.”

Buffett was asked if he went back in time, could he recreate Berkshire Hathaway? He replied that the “odds are against it.” Mainly, he suggested, because he had experienced much good luck.

For instance, despite both growing up in Omaha, Buffett and Munger were introduced through a mutual contact when Buffett was in his late 20s and Munger in his mid-30s. Flash-forward more than 50 years, and in his 2014 letter to shareholders, Buffett credited Munger as the architect of Berkshire Hathaway: “The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.”

The two men’s introduction might have been fortuitous, but turning a meeting into a lifelong partnership is the ultimate example of being “open to good accidents.”

Bonus: “made some of that luck by being curious” — Charlie Munger

Buffett noted that he was also lucky to have accidentally met Lorimer Davidson in 1951. Davidson, who was named CEO of GEICO in 1958, spent four hours educating Buffett on the insurance industry during their chance meeting.

What Buffett did not mention was that his curiosity about GEICO encouraged him to hop on a train from Washington, D.C. to Maryland and visit the company. It was closed. Unfazed, Buffett pounded on the door until the custodian showed up and pointed him toward Davidson. After the meeting, Buffett began buying shares of GEICO and eventually purchased the company in 1995.

As Munger explained, he and Buffett are “dissatisfied with what they know,” and their curiosity forces them to continue learning and adapting. This has helped them — and can help you — create some of their own luck.

Dave Koppenheffer owns shares of Berkshire Hathaway. The Motley Fool has a disclosure policy.

http://time.com/money/3854027/warren-buffett-investing-advice/?xid=fbshare

How to Invest in Great Companies Like Warren Buffett

•   
• By Morgan Quinn
 
• December 2, 2014

Warren Buffett didn’t become the world’s fourth richest person by accident — he is one of the most strategic and calculated investors of our time, with a long-term investment strategy that has been described as the “Rip Van Winkle approach.” Buffett always invests in companies with good long-term prospects, staying away from technology, startups and any flash-in-the-pan bets. (The Oracle of Omaha also stays away from mutual funds, because he believes that over-diversification can hamper returns. Instead, he makes significant investments in just a handful of companies.)

Warren Buffett Among ‘Best Personal Finance Expert’ of 2014 Finalists — Vote For Your Top Pick Here>>

What Warren Buffett Looks for in Investments

Buffett’s investments are, well, pretty boring. He favors companies that offer basic services and products: razors, laundry detergent, soft drinks, auto insurance. He subscribes to the Benjamin Graham school of value investing: Look for securities that are undervalued based on their intrinsic worth — because, though intrinsic worth is difficult to measure, it’s the best way is to analyze a company’s fundamentals.

Fundamentals are what contribute to the financial valuation of a company, security or currency. For a business, that means revenue, earnings, assets, liabilities and growth. To find this, you’d have to look at a company’s balance sheet, income statements and cash flow to determine its health and growth prospects. If the company carries little debt and has a lot of cash, those are strong fundamentals.

“The trick to investing is to buy good businesses.”

Buffett reportedly says this when people ask for his investing advice; of course, this kind of dictum can lead to more questions: How do you know if the business is good? How do you even know where to look? The answer is, in many ways: It’s just as easy as Buffett says it is.

Read: Warren Buffett Reveals His No. 1 Investment Strategy That Anyone Can Follow

5 Tips for Investing Like Warren Buffett

1. Do Your Research

According to CNBC, Warren Buffett reads five newspapers a day, but let’s not forget he also has a team of economists and analysts under his wing, as well as companies offering him premium stocks in hopes he will invest (we should all be so lucky!).

Start with quarterly reports, familiarize yourself with the language of business and become proficient at reading financial statements. According to Buffett, “Accounting is a language all its own and getting comfortable in a foreign language takes a little experience, a little study early on, but it pays off big later.”

2. Figure Out What You Know

This is a basic principle of Buffett’s investment strategy. Good companies are in an industry you understand, selling products and services that people love, have long-term value and are fairly priced. Finding out what you know is easy — here’s how you do it.

3. Do the Math

• Return on equity: Buffett prefers this metric over earnings per share because return on equity measures management’s ability to create shareholder value. The math is simple: Divide the net income by shareholder equity — that equals return on equity. Run the numbers on a few competitors; the winning number should come in over 15 percent.
• Debt-to-equity ratio: A company with a low debt-to-equity ratio is conservatively financed, another Buffett parameter. This is another easy equation: Simply divide the company’s total liabilities by stockholders’ equity. Debt-to-equity ratios can vary by industry, but since we are playing it safe like Buffett, look for debt-to-equity ratios below 1. High ratios can mean a company has been financing its growth with debt, which is not usually a sustainable practice — it can lead to volatile or uncertain earnings, high interest rate charges or even bankruptcy.
• Price-to-book ratio: Buffett does not like to pay a premium for anything, including stock prices. He has famously said, “Whether we are talking about socks or stocks, I like buying quality merchandise when it is marked down.” A simple way to find out if a stock is priced is low is to calculate the price-to-book ratio. The P/B ratio is calculated by dividing the current closing stock price by the company’s total assets expressed on its balance sheet. A lower P/B ratio might indicate a stock is undervalued or it can mean the company is earning a very poor return on its assets, which is why the return on equity number you calculated earlier is so important.
• Forward price-to-earnings ratio: The forward price-to-earnings ratio is used to compare current earnings to potential future ones, but it’s just an estimate and should not be considered reliable data – its merely a forecasting exercise. To calculate the forward P/E, divide the market price per share by the expected earnings per share. If earnings are expected to grow, the ratio will be low. The lower the forward P/E ratio, the better the value.

Related: 7 Unbelievable Ways Warren Buffett Practices Frugality

4. Start Small and Sit Tight

Once you have determined which company you want to invest in, open a brokerage account with a low minimum. Start with a small number of stocks until you get more confident. Don’t overthink this — perfect timing is impossible to predict. Many investors make the mistake of trying to time their purchases or obsess over moving their investments around to get better returns. Rapidly trading in and out of stocks can be profitable in the short-term but you will lose long-term returns because turnover increases the taxes paid on capital gains and commission dollars.

5. Ignore Both Optimists and Pessimists

Ignore the negative Nellies — there will always be negativity in the marketplace and people insisting an economic downturn is just around the corner. Ignore the eternal optimists, too — the people who swear things are only going up from here. Focus your efforts on finding a good company you know that is undervalued by the market. Don’t worry about the highs and the lows — you’re in this for the long haul. If you’ve done your research you should trust yourself and the investment. After all, remember this famous piece of Buffett advice: “As long as you know the company you’re investing in, the better it is for a buyer. Down days always make me feel good.”

http://www.gobankingrates.com/personal-finance/invest-great-companies-like-warren-buffett/

THE BIG PICTURE. Investing is less about the stock price and more about the value of the business.

The Big Picture

Finding companies you know is only the beginning; the circle of competence is only meant to help you stay within your arena of expertise. 

Once you have generated a list of the companies you understand, the next step should be conducting an analysis of the financials. 

Don’t worry — you don’t have to be a finance whiz to understand the basics of the stock market. 

For example, Berkshire Hathaway’s investment philosophy is surprisingly simple: The company should have 
1.  consistent earning power, 
2.  good return on equity, 
3.  capable management and 
4.  be sensibly priced. 


Investing is less about the stock price and more about the value of the business — is it a good one?

Successful investing is more about learning over time and slowly expanding your circle of competence. For now, stick with what you know and focus on the long term. 

Anyone can find success in the stock market; you just have to keep it simple. 

As Buffett has famously said, “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” And you know what? $60 billion says he’s right.

Warren Buffett’s Investment Secret: Stick to What You Know

•   
• By Morgan Quinn
 
• November 16, 2014

“Why not invest your assets in the companies you really like? As Mae West said, ‘Too much of a good thing can be wonderful.” — Warren Buffett

Warren Buffett is considered one of the greatest investors in modern history. He started out as a young financial analyst in the 50s and now has accumulated a fortune worth over $60 billion. When asked for investing advice, Buffett often suggests that investors stick to buying stock in businesses they understand, which is a key principle in his own strategy.

The Oracle of Omaha buys what he knows; his portfolio is low in tech and doesn’t include any biotech or internet companies. His top stock holdings are familiar names: American Express, Coca-Cola, Wells Fargo and IBM. Even his private companies are fairly traditional: Heinz, GEICO, Fruit of the Loom and others.

Related: 5 Industries That Will Never Get Warren Buffett’s Money

This might seem like a rather boring way to play the stock market, but it works: Shares of Berkshire Hathaway have more than doubled in the last five years, which is a reflection of the strength of Berkshire’s shareholder relations and the businesses it has purchased — Burlington Northern, See’s Candies, Dairy Queen, Benjamin Moore, Justin Boots and others.

Buffett is more interested in long-term holdings and is infamously resistant to investing in “the next big thing.” He avoided technology stocks in the late 1990s in part because he had no knowledge or experience in that industry. He is attracted to slow-growth, old technology stocks that are long-term investments and can generally withstand economic downturns.

Why Investing in What You Know Makes Sense

For most of us, it’s easier to understand a business or product we encounter on a regular basis. Investing in what you know allows you to more easily place value on the stock and stay informed on industry trends. If you don’t understand what the company does or how it makes money, how will you be able to manage your investment?

Warren Buffett often cites the “circle of competence” concept, which is a way for investors to focus only on operating in the areas they know best. This is the reason Buffett does not invest in biotech and technology — those industries are unfamiliar, change too frequently and have short track records. Straying outside the circle of competence leads an investor into the land of speculation.

We all have our own areas of expertise, whether influenced by experience, education or both, and we should lean into that knowledge when choosing investments. You don’t need to be an expert on every company in your industry; you just need the ability to evaluate companies within your circle of competence. For example, an investor who has spent the last 10 years working in a garment factory would have an advantage when analyzing the strengths and weaknesses of a clothing manufacturer or determining the climate of the industry.

Related: 7 Unbelievable Ways Warren Buffett Practices Frugality

What Do You Know?

When it comes to investing in what you know, how do you know what you know? Are you following me here?

Take a trip to your local supermarket or shopping center and look for the most popular items. Look through your cabinets and pantry: take note of which products you use regularly. Many of your favorite brands could be made by the same manufacturer, like Proctor and Gamble, General Mills or Sara Lee foods, all of which are traded publicly on the stock market.

Also, think about what your kids have been asking for or what they want for their birthdays and holidays. Peter Lynch, the father of the “invest in what you know” mantra, says he got some of his best investing ideas from listening to his wife and kids after they came back from running errands. For example, Lynch bought stock in Hanes after his wife raved about her pair of L’eggs, a new line of pantyhose from the company. That investment ended up making him millions.

Related: The 5 People Who Made Warren Buffett

The Big Picture

Finding companies you know is only the beginning; the circle of competence is only meant to help you stay within your arena of expertise. Once you have generated a list of the companies you understand, the next step should be conducting an analysis of the financials. Don’t worry — you don’t have to be a finance whiz to understand the basics of the stock market. For example, Berkshire Hathaway’s investment philosophy is surprisingly simple: The company should have consistent earning power, good return on equity, capable management and be sensibly priced. Investing is less about the stock price and more about the value of the business — is it a good one?

Successful investing is more about learning over time and slowly expanding your circle of competence. For now, stick with what you know and focus on the long term. Anyone can find success in the stock market; you just have to keep it simple. As Buffett has famously said, “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” And you know what? $60 billion says he’s right.

http://www.gobankingrates.com/personal-finance/warren-buffetts-investment-secretstick/

6 Things Warren Buffett Says You Should Do With Your Money in 2015

•   
 
• By Lucy Mueller
 
• December 12, 2014

Warren Buffett is such an investing powerhouse, it’s hard to list his credentials without making him sound like Dos Equis’ Most Interesting Man in the World: He made his first stock purchase when he was 11 and 99 percent of his $63 billion fortune after his 50th birthday. He was the lone insurance policy for Pepsi’s Billion Dollar Sweepstakes. People stand in line to get a photo with his wallet.

The Oracle of Omaha is one of the most influential businessmen in the world — and, arguably, the most frugal, a billionaire that once complained “most toys are just a pain in the neck.” As often as he’s on CNBC’s “Squawk Box” talking about holding company Berkshire Hathaway’s per-share book value, he’s urging students to stay out of credit card debt and increase their savings.

With the year winding down, we combed through all the advice Buffett has given us in 2014, from the sublime (“Price is what you pay, value is what you get”) to the ridiculous (“A bull market is like sex. It feels best just before it ends”).

The net result? Six things you should be doing with your money in 2015, from the master’s mouth.

Warren Buffett’s Best Advice for 2015

1. Put Your Estate in Index Funds

In his 2014 letter to Berkshire Hathaway shareholders, Buffett revealed his estate plan, reminding readers to keep their investments safe, low-cost and long-term. Turns out, he’s planning on leaving all of the cash for his wife in a product that’s as old, stodgy and lucrative as himself.

“My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.”

2. Stay Away From Bitcoin

Given Buffett’s almost wholesale aversion to tech, this one isn’t a surprise; the Oracle refuses to invest in what he doesn’t know, and he doesn’t know the technology sector, IBM notwithstanding. But Buffett’s problem with Bitcoin isn’t that it’s a tech investment — it’s that it’s not any kind of investment at all, because it doesn’t have value, as he explained in a March interview with CNBC.

“Stay away from it. It’s a mirage, basically. … It’s a method of transmitting money. It’s a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money? Are money orders? You can transmit money by money orders. People do it. I hope Bitcoin becomes a better way of doing it, but you can replicate it a bunch of different ways and it will be. The idea that it has some huge intrinsic value is just a joke in my view.”

3. Learn How to Read Financial Statements

Buffett gave this advice to Tre Grinner, a 17-year-old with Hodgkin’s Lymphoma who recently secured a Goldman Sachs internship with the help of the Make-a-Wish Foundation. Buffett surprised the intern with a call while he was being interviewed by CNBC in August, offering him this advice:

“Take all the accounting courses that you can find. Accounting is the language of business. … It’ll make it so much easier for years and years to come for reading financial statements, to get comfortable with it, because it is a language all of its own. Getting comfortable in a foreign language takes a little experience, a little study early on, but it pays off big later on.”

4. Focus on Saving, Not Getting Rich Quick

Ironically, Buffett dropped this tip when promoting his basically unwinnable billion dollar bracket challenge on the Dan Patrick Show. The sweepstakes, backed by Buffett and Quicken Loans, would award $1 billion to anyone who devised a perfect NCAA March Madness bracket. (The odds of winning were about 1 in 9.2 quintillion — you were 53 billion times more likely to win the Powerball.) Still, the Oracle’s advice was solid:

“Well, I think the biggest mistake is not learning the habits of saving properly early. Because saving is a habit. And then, trying to get rich quick. It’s pretty easy to get well-to-do slowly. But it’s not easy to get rich quick.”

5. When Stock Prices Drop, Buy — Don’t Sell

It was a volatile year for the market and Buffett’s wealth; the investor lost about $2 billion in the course of several days in October when Coke and IBM took a hit after their quarterly earnings reports. Buffett kept calm, though, giving several interviews in which he explained why he was a fan of bear markets. Granted, when you’ve got $63 billion to your name, this kind of a hit is lunch money. But, as the Oracle explained to CNBC, investors with itchy trigger fingers rarely succeed.

“I like buying it as it goes down, and the more it goes down, the more I like to buy. … If you told me that the market was going to go down 500 points next week, I would have bought those same businesses and stocks yesterday. I don’t know how to tell what the market’s going to do. I do know how to pick out reasonable businesses to own over a long period of time.”

6. Stop Pretending to Be an Expert

“If you don’t invest in things you know, you’re just gambling,” Buffett told CNBC earlier this year. It’s advice he’s rarely strayed from, and the reason why tech, gold and airlines will never get his money (or, in the case of airlines, get his money again). As he wrote in his 2014 shareholders letter:

“You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick ‘no.'”

 http://www.gobankingrates.com/personal-finance/6-things-warren-buffett-says-should-money-2015/

He made his first stock purchase when he was 11 and 99 percent of his $63 billion fortune after his 50th birthday.

12 Experts Explain The Secret To Buffett’s Success.

12 Experts Explain The Secret To Buffett’s Success. 

If you’re interested in finance, trying to crack the secret of Warren Buffett‘s success is as entertaining as it is maddening — an enticing Rubik’s cube for anyone looking to get rich. Buffett’s success is so elusive — and so far, unreplicated — that it took a team of Yale academics to determine the Oracle of Omaha does not owe his $73 billion fortune to magic.

“Buffett’s returns appear to be neither luck nor magic,” found a 2013 research paper published on Yale’s website, which boiled down Buffett’s actual secret sauce to “reward for use of leverage combined with a focus on cheap, safe, quality stocks.” (Not-so-secret, really: Buffett admitted to this strategy more than 30 years ago.)

Still, if asked to explain the source of his “alpha,” Buffett is as divided as his devotees — at times shmaltzy (“I found what I love to do very early”), other times coy (“You can’t produce a baby in one month by getting nine women pregnant”) and more often than not, completely blunt: “‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

We interviewed some of America’s biggest money experts, and threw them a gauntlet: Tell us the secret to Warren Buffett’s success.

Here’s how they explained the Oracle’s track record.

12 Experts on Why Warren Buffett Is Successful

1. His No. 1 focus is growing his wealth

According to Brandon Turner, real estate investor and co-host of “BiggerPockets Podcast,” Buffett has a single-track mind — and that’s worked well for him.

“I think Warren Buffett succeeded because he focused 100 percent on growing wealth above all other things,” Turner said. “He made it a point to continue his education his entire life and stick to sound business principles.“

2. He invests in businesses that aren’t competitive

“Warren Buffett identifies companies that generally don’t face an enormous amount of competition, and holds them for years — or forever,” said Clark Howard, a consumer expert and host of “The Clark Howard Show.” “His failures have tended to be in businesses that were too competitive.”

3. He doesn’t scare easy

Andrew Horowitz, CFP, author and host of “The Disciplined Investor,” told us Buffett owes his wealth to one factor: “Time. He has a holding period that appears to be infinite so he does not get spooked by market moves. He also knows that the best time to buy is when everyone else is selling.“

4. He doesn’t let his ego get in the way

Journalist Emma Johnson, host of “Like a Mother with Emma Johnson,” mentioned Buffett’s famous penchant for value investing — but said his real X-factor was his personality.

“As an investor, Buffett’s success is well-documented — he buys easy-to-understand companies with reasonable management and an intrinsic value. So easy, anyone can understand it,” Johnson said. “But Buffett’s success as a beloved public character is the real magic. We can attribute that to his humble persona: We love him for his habits that include banjo-playing, cheeseburger devotion and that he has lived in the same, relatively modest house in not-so-glamorous Omaha for 55 years. That he is self-made and earned 99 percent of his wealth after age 50 inspires us to believe that success is possible for all of us, and his adherence to a modest life of family and charity are great lessons on wealth that apply to us all. He’s both fabulous and accessible, and we love him for it.”

5. He takes advantage of a simple and age-old combination

Buffett uses a straightforward formula that pays off for anyone who gives it the time, said John Lee Dumas, founder and host of the podcast “Entrepreneur On Fire“: “Compound interest plus patience .”

6. He sticks to what he knows

“I don’t know much about Warren Buffett other than I’ve heard that he invests in what he ‘knows‘ and/or has ‘learned,'” said Matt Theriault, host of the podcast “Epic Real Estate Investing.” “In my experience, with the right education and information backing investment decisions, most people would be a success.“

7. He’s aggressively anti-stupid

According to Stephen Dubner, co-author of the best-selling “Freakonomics” series and host of “Freakonomics Radio,” Buffett has an unerring sense for what is just plain dumb.

8. He tries to be the best at one thing

Buffett focuses all his energy in one place, according to Laura Adams, a personal finance expert and host of “Money Girl.”

“Buffet’s success seems to come from passion for his work, good mentors early in his career, and striving to be the best at one thing — his consistent knack for identifying undervalued companies to invest in,” she said.

9. He thinks years in the future

Most investors are too short-sighted, Chris Hill, host of “Motley Fool Money,” told us.

“While many on Wall Street are thinking about the next quarter, Warren Buffett is thinking about the next five, ten, and twenty years,” he said. “That may seem like a small thing, but it is a radical departure from the short-term mindset that drives so much trading activity. It’s also why Buffett is the greatest investor we will ever see in our lifetimes.“

10. His investments are diversified and long-term

“He has said it many times: He invests only in things he understands (relying on his common sense, which we all have), he doesn’t put too much of his money into any one investment (called diversification), and his holding period is “forever” (called a long-term approach),” said Ric Edelman, chairman and CEO of Edelman Financial Services, and host of “The Truth About Money with Ric Edelman.” “The best part is that anyone can replicate the strategy used by Warren — and since it made him the world’s most successful investor, we all can become financially successful, too!“

11. He plays the No. 1 game for investors

When Robert Kiyosaki — inveterate investor and founder of “Rich Dad Radio Show” — was young, he learned about business and money by playing Monopoly.

Apparently, the Oracle of Omaha invests like he’s played the game a couple times himself. “He, too, plays the game of Monopoly in real life,” Kiyosaki told us.

12. He’s a “go-giver”

Farnoosh Torabi, financial strategist, author, and host of “So Money with Farnoosh Torabi,” told us Buffett’s truly outstanding factor is his largesse.

“He’s a go-giver,” she said. “He’s incredibly philanthropic and I’ve discovered from countless interviews with some of the most successful people on the planet that being a giving person with your money, time, ideas yields abundance in your life. Warren, consistently ranked as one of the world’s wealthiest individuals, has pledged to give away 99 percent of his fortune. That’s outstanding.”

Read more: http://www.investopedia.com/partner/gobankingrates/articles/investing/032515/12-experts-explain-secret-buffetts-success.asp#ixzz3aFL9PEFk 
Follow us: @Investopedia on Twitter

This article is a part of GOBankingRates‘ “Money on the Air” series. Vote for your favorite podcaster or radio show host — and check back for more interviews with them — here on GOBankingRates throughout March.




Trying to crack the secret of Warren Buffett's Success - use of leverage combined with a focus on cheap, safe, quality stocks.