Ten Best Lessons About Investing VS Gambling From Warren Buffett

The oracle of Omaha as Buffett has come to be known over the years is one of the most relatable billionaires for people of all ages around the world. He is a great public speaker and always has advice for the hardest and the best of times. The one thing he never stops doing is taking risks. Having made over $1000 billion since he bought his first share at the age of 11, Warren Buffett has more than beat the odds and earned the status of being a legend. There are thousands of quotes that Buffett gives to rooky and expert investors and gamblers. He is not the biggest fan of gambling but he has some advice that gamblers and investors will find useful.

The 20 Slot Rule

Both Warren Buffett and Bill Gates were asked to write down the one character they attributed to their success in life and they both wrote the word FOCUS. It all agrees with Mr Buffett’s 20 slot rule that he taught MBA students at the University of Florida in which he said ideas that you will not get ideas that can make you rich all your life. You might have five, eight, or even twenty. He equated the number of such ideas that a person may have in life to a card with 20 slots of which a slot is lost once you punch the card. His lesson was that following your ideas to completion is key for you to succeed in life; Not leaving a bunch of incomplete pursuits along the way.

A Good Investment Doesn’t Always Mean The Highest Returns

According to Warren Buffett, you should never invest in stocks out of enthusiasm seeking the adrenaline of winning. Investing is all about calculating investing and then waiting to see whether the shares will earn steady returns over time. According to Warren Buffett, the highest returns are often one-time hits and are always very risky. A good investment paying off steadily will always beat the highest return investment over time and with a lower risk of losses.

Forecasts May Tell You A Great Deal About The Forecaster. They Tell You Nothing About The Future

Warren Buffett has made it clear many times that he doesn’t look at financial forecasts when making investments and this quote is his reason for that scepticism. Forecasts may sound justified and convincing but they are never the best indicator of what shares will be worth in future because they are just opinions and that is it. Just because there is a positive forecast for a certain investment, doesn’t mean that it is the right one to put your money on.

Gambling Is A Tax On Ignorance

Warren Buffett is not a big fan of Gambling. During the Berkshire shareholders meeting in 2007, Mr Buffett criticized the state and federal governments for making it so easy for more people to gamble. He said it is true that gambling brings lots of tax revenue to the government but it is only a few people who pay this tax and it is not fair to them because most of them are from the poorest households. He stated that America’s poorest households pay a large percentage of their income to casinos and lottery tickets which essentially causes more imbalance in society. As a lesson, you should remember to gamble only when you can really afford it and ensure you don’t put your household’s income in jeopardy.

The Most Important Quality For An Investor Is Temperament Not Intellect

Many people think that Buffett is a billionaire because he is an investment genius but he gave more credit to his patients than his smarts in an interview. “You need a temperament that neither derives great pleasure from being with the crowd nor against it,” he said. Mr Buffett doesn’t encourage bandwagonism when it comes to investing because he believes the crowd is wrong more times than it is right. That is why he tells people to invest when everyone else is afraid and hold onto their stocks for as long as they still have faith in them.

If You Are Not Willing To Own Stock For 10 Years Don’t Even Think About Owning It For 10 Minutes

How long do you think you can hold onto those shares you are buying? Well, according to Mr Buffett, you should buy shares even in his own Berkshire Hathaway if you are not willing to hold onto them for 10 years. In other words, if you don’t have faith in the possibility of these shares being valuable in a decade, there is no need to waste your time analyzing the investment. You should only invest in something you really have faith in.

Watching Rich People Gamble Taught Him That He Could Get Rich Easily

When asked about how he knew he could be rich, Warren Buffett said that watching well-dressed people in casinos losing their money because they bet even when the odds were against them taught him that he wouldn’t have a problem getting rich. That doesn’t mean that he has something against rich people gambling, he just encourages them to be smart by betting on better odds.

Never Invest In A Business You Cannot Understand

This is one of the wisest quotes ever made by Warren Buffett. He believes that the best investment you can ever make is in yourself and that means that you are the only person that knows what is best for you. Trusting in someone else’s ability to earn money for you is a bad idea. You have to evaluate each business individually and invest according to the level of trust you have in its future.

The Propensity To Gamble Is Increased By A Large Prize Versus A Small Entry Fee

When do you think everyone rushes to buy lottery tickets? Well, it happens when the prize hits its highest. What many people don’t know is that as the prize increases, the odds of winning it grow smaller and are actually closer to zero than they were when it was smaller. People will therefore spend more money when the entry fee seems very small while promising them a life-changing prize. The truth is that losses increase when the entry fee is reduced because the odds increase in favour of the house.

When Promised Quick Profits, Reply with A Quick No

Future viability should be your first instinct when making an investment. You should be able to analyze the stability of the company you are investing in within a decade and be able to project the possible returns you will have in that period. According to Warren Buffett, the moment quick profits become the driver of a certain investment, you should quit because that is an indicator of instability and that is not something you want to invest in.

Never Depend On A Single Source Of Income. Make An Investment To Create A Second One

This is a bonus addition that happens to say a lot about why Mr Buffett is so successful. According to Warren Buffett, there is no safety for any investor if redundancy is not involved. You have to be sure that if one investment fails or doesn’t pay enough, you will still be able to get income that can keep you going and that means spreading your investments across different projects.