Warren Buffett Rules - Warren Buffett Investment Strategy [2021] (2024)

FAQs

What are Warren Buffett's first 3 rules of investing money? ›

Buffett's approach prioritizes a "margin of safety," paying less than a company's intrinsic value to protect against losses. Quality over quantity: He avoids struggling businesses, preferring wonderful companies at fair prices.

The rule's origin is reported as advice given by Buffet to his personal pilot, Mike Flint. Flint asked Buffet for career advice, leading to Buffet thinking of the 5/25 rule. Buffet asked Flint to list his top 25 career goals, pick the top five, and avoid the rest until the top five are achieved.

Warren Buffet's 2013 letter explains the 90/10 rule—put 90% of assets in S&P 500 index funds and the other 10% in short-term government bonds.

A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.

Buffett's Two Lists is a productivity, prioritisation and focusing approach where you write down your top 25 goals; circle your 5 highest priorities; then focus on those 5 while 'avoiding at all costs' doing anything on the remaining 20.

He owns a small bit of each in his portfolio for Berkshire, too. The two investments held in Berkshire Hathaway's portfolio that Buffett recommends more than anything else are two S&P 500 index funds. The SPDR S&P 500 ETF Trust (NYSEMKT: SPY) and the Vanguard S&P 500 ETF (NYSEMKT: VOO).

“One bequest provides that cash will be delivered to a trustee for my wife's benefit,” he wrote. “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.” Buffett recommended using Vanguard's S&P 500 index fund.

Warren Buffett dedicates much of his workday to reading—approximately 80%. He believes in constant learning and attributes much of his success to this habit. Additionally, he spends time attending meetings and managing his company, Berkshire Hathaway.

What is Warren Buffett's weakness? ›

Unable to bear the bureaucracy. According to Warren's own confession, his key weakness is the lack of patience when it comes to bureaucratic issues.

The old-school approach for many investors and financial advisors has traditionally been to structure an investment portfolio on a 70/30 basis (or similar figures). This strategy allocates 70% of an investor's funds to equities or equity-focused investments, and 30% to bonds, or fixed-income investments.

A common asset allocation rule of thumb is the rule of 110. It is a simple way to figure out what percentage of your portfolio should be kept in stocks. To determine this number, you simply take 110 minus your age. So, if you are 40, then the rule states that 70% of your portfolio should be kept in stocks.

1. Understanding the 10-5-3 Rule. The 10-5-3 rule is a simple rule of thumb in the world of investment that suggests average annual returns on different asset classes: stocks, bonds, and cash. According to this rule, stocks can potentially return 10% annually, bonds 5%, and cash 3%.

Warren Buffett once said, “The first rule of an investment is don't lose [money]. And the second rule of an investment is don't forget the first rule. And that's all the rules there are.”

Here's the classic Buffett quote: "Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don't have the first, the other two will kill you."

“The first rule of investment is don't lose. The second rule of investment is don't forget the first rule.” Buffett famously said the above in a television interview. He went on to explain that you don't need to be a genius in the investment business, but you do need what he deems a “stable” personality.