Some of his most important rules include: Rule 1: Never lose money. This is considered by many to be Buffett's most important rule and is the foundation of his investment philosophy.
The 7-Year Rule for investing is a guideline suggesting that an investment can potentially grow significantly over a period of 7 years. This rule is based on the historical performance of investments and the principle of compound interest.
“The first rule of investing is don't lose money. The second rule is don't forget the first rule. And that's all there is to it.” This quote by Warren Buffett sums up the core of his investment philosophy marking his strong aversion to losses.
Many novice investors lose money chasing big returns. And that's why Buffett's first rule of investing is “don't lose money”. The thing is, if an investors makes a poor investment decision and the value of that asset — stock — goes down 50%, the investment has to go 100% up to get back to where it started.
The 90/10 rule in investing is a comment made by Warren Buffett regarding asset allocation. The rule stipulates investing 90% of one's investment capital toward low-cost stock-based index funds and the remainder 10% to short-term government bonds.
Rule No.
1 is never lose money.
Buffett's most commonly cited financial advice is as follows, “Rule №1: Never lose money. Rule №2: Never forget rule №1.” So, before investing, determine whether you can lose the money you're investing in.
The 3 Ps of investing: purpose, plan, and patience.
You should sell a stock when you are down 7% or 8% from your purchase price. For example, let's say you bought Company A's stock at $100 per share. According to the 7%-8% sell rule, you should sell the shares if the price drops to $93 or $92.
To answer the question of how to double my money quickly, simply invest in a portfolio of investment options like ULIPs, mutual funds, stocks, real estate, corporate bonds, Gold ETFs, National Savings Certificate, and tax-free bonds, to name a few.
YOUR INVESTMENT PORTFOLIO
In this case, many investors will find that roughly 20% of their investment holdings will lead to about 80% of their growth. While these percentages won't be exact, the general rule applies that a small number of your investments will result in the most growth.
The Pareto principle or the 80/20 Rule - the fact that 20% of efforts cause 80% of the results across many areas of our life - is a critical mental model that has driven Warren Buffett's success.
Warren Buffett and his mentor, Ben Graham, championed Rule #1 for one fundamental reason: minimizing loss. By minimizing losses, even in subpar investments, you increase your chances of finding winning investments over time.
The 70/30 rule is a guideline for managing money that says you should invest 70% of your money and save 30%. This rule is also known as the Warren Buffett Rule of Budgeting, and it's a good way to keep your finances in order.
“Price is what you pay; value is what you get.” Buffett is probably the most famous practitioner of value investing, which involves buying stocks at a discount to their intrinsic value.
Buffet asked Flint to make a list of 25 career goals. Flint did so, after which Buffett asked to circle the five most important goals from the list. Flint pored over the list of goals and selected his top five. He had two lists now: the five most important goals and 20 less critical goals (hence the 2-List title).
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.
Think Value and Think Long-Term
Find undervalued companies, invest in them, and wait. Over time, the market usually recognizes their true value, and boom — your investment grows. But here's the key — you have to think long-term. As Buffett says, “Stocks are very safe for the long run and very unsafe for tomorrow.”
Buffett once famously said, "Rule 1: Never Lose Money and Rule 2: Never Forget Rule 1." - Warren Buffet, at the Berkshire Hathaway annual shareholders meeting in 1999, was asked how to make $30 billion. His advice? Start early.
This tool is helpful for investors, economists, and anyone interested in understanding the power of compounding growth. The rule of 70 is a way to estimate the doubling time of a quantity based on its growth rate. To use it, divide 70 by the annual growth rate (in percent).
The Rule of 90 is a grim statistic that serves as a sobering reminder of the difficulty of trading. According to this rule, 90% of novice traders will experience significant losses within their first 90 days of trading, ultimately wiping out 90% of their initial capital.
The 40/30/20/10 rule is a budgeting framework that separates what you earn into categories for spending your after-tax income: 40% for needs. The biggest category for most people is day-to-day needs. This includes housing, utilities, transportation, health care and groceries.