Posted by: garispang | July 11, 2009

Warren Buffett’s Top Three Investment Rules for the Average Joe

Warren Buffett Bridge 2005Warren Buffett isn’t shy about giving advice.  If he hadn’t gone into the investing business, he could well have made teaching his profession.

Now that he’s the world’s greatest living investor, there are plenty of pupils anxious to attend class.

In a taped interview, Bianna Golodryga asks Buffett for his “top three pieces of advice for average Americans who want to grow their savings and keep their money safe.”

In this venue, there’s no mention of intrinsic values, durable competitive advantages, or even buy-and-hold.

Buffett’s response:

  1.  
    1. If it seems too good to be true, it probably is.
    2. Always look at how much the other guy is making when he is trying to sell you something.
    3. Stay away from leverage.  Nobody ever goes broke that doesn’t owe money.

Buffett also finds important life and investing lessons in his favorite game:

“In bridge, everything anybody does or doesn’t do, you’re drawing inferences from, including your partner and your opponents.  You’re working with a partner.  If you don’t work well with partners you’re not going to have a winning bridge team over time.  And everything you’ve learned from the past has some utility on the next hand you play.  The next hand, you’ve never played it before and you’ll never play it again in your life.  But on the other hand, the problems you’ve solved in the past are useful in solving the problems there.  And you have to keep paying attention all the time.  You can’t coast.”

And while Buffett doesn’t think that everyone should necessarily get a college degree, he does strongly believe in the value of learning, as any good teacher would.

“Generally speaking, investing in yourself is the best thing you can do.  Anything that improves your own talents.  Nobody can take it away from you.  They can run up huge deficits, the dollar can become worth far less, you can have all kinds of things happen.  But if you’ve got talent yourself, and you maximize your talent, you’ve got a terrific asset.” 

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