5 New Investing Lessons You Can Steal from Warren Buffett

5 investing tips from Warren Buffett

It’s important to note that before you put everything into investing, Buffett would want you to pay down any debt.

From there, most of his advice this year centres around keeping true to yourself, your gut and avoiding fad traps.

1. Investing isn’t a game

Buffett has been pretty open with his thoughts on the popularity of investing apps in the wake of the GameStop fiasco. His issue isn’t exactly with the apps themselves, but rather how they encourage newbie investors to treat trading like a game.

“I think the degree to which a very rich society can reward people who know how to take advantage, essentially, of the gambling instincts of the American public, the worldwide public — it's not the most admirable part of the accomplishment,” he says.

With the right approach, low or no-commission trading apps can be very profitable — as long you don’t treat them like toys.

2. Slow and steady wins the race

Buffett says he advises most investors to simply purchase an S&P index fund over buying individual stocks — even including his own company.

"I recommend the S&P 500 index fund. I've never recommended Berkshire to anybody because I don't want people to buy it because they think I'm tipping them into something. On my death there's a fund for my then-widow and 90% will go into an S&P 500 index fund," he says.

Canadians can easily buy into the S&P 500 through a number of exchange traded funds (ETFs) that track the index. Or you can look into the S&P/TSX Composite, if you want to bet on Canadian businesses instead. Either will give you a slice of some of the biggest companies in North America, and many investors — including Buffett — recommend this strategy for investors planning for the long term.

Just make sure that, if you’re using an investing app, you pick one with low fees that doesn't eat into your steady profits.

3. Trust your instincts

Buffett has long distrusted tech, but he finally began investing in Apple in 2016. It’s now one of his most valuable investments.

But last year, he offloaded some of Berkshire Hathaway’s Apple shares.

"That was probably a mistake,” he says of the move.

However, one sale Buffett doesn’t regret is dumping all of his airline shares. While he “doesn’t consider it a great moment in Berkshire’s history,” the company can boast it has more net worth than any other business in the U.S. — and the airlines were the better for it, too.

“I think the airline business has done better because we sold and I wish them well but I still wouldn’t want to buy the airline business,” Buffett said.

If you don’t trust your investing instincts quite yet, a robo advisor can make the tough decisions for you and start making money in the background while you keep learning.

4. The present doesn’t always dictate the future

There’s no telling for sure if what’s popular today will still matter tomorrow. And Buffett says that shouldn’t be your overall goal when it comes to investing anyway.

“There’s a lot more to picking stocks than figuring out what’s going to be a wonderful industry in the future,” said Buffett.

To illustrate his point, he put up a slide of all the auto companies from decades ago that started with the letter “M.” The list was so long it didn’t fit on a single slide.

That’s because when cars started to become commonplace in the 1900s, Buffett says about 2,000 businesses flooded the industry, expecting it would have “an amazing future.”

But by 2009, he notes, there were three automakers left, and two went into bankruptcy proceedings.

With that in mind, don’t invest everything in what’s exciting and new. Instead, build a modest portfolio and always remember that things can go south without warning. (That’s why life insurance can be one of your most prudent investments.)

5. Don’t lose a certain amount of caution

With the rise of special purpose acquisition companies (SPACs) or “blank check companies,” designed to raise the funds to buy an existing company, Buffett is wary of rampant speculation taking place in the marketplace.

“The SPACs generally have to spend their money in two years, as I understand it. If you have to buy a business in two years, you put a gun to my head and said, ‘You’ve got to buy a business in two years,’ I’d buy one but it wouldn't be much of one,” he says.

He has a similar level of disdain for bitcoin, which he opted to dodge commenting on during the meeting — although he acknowledged how much he hates it when politicians do the same.

Buffett has also become more concerned about inflation in the U.S., which has begun to accelerate lately, with increasing demand in certain areas of the supply chain.

His concern here likely stems from the fact that higher prices can cut into the value of future company profits. “We’re not going to have much luck on acquisitions while this sort of a period continues,” Buffett says.

In the meantime, don’t stop investing; just make sure you’re careful and strategic with your money. And if you intend to keep a big chunk of your money in cash, don’t leave it in a traditional savings account where inflation will rip it apart. Put it somewhere safe where it can actually grow.