How to become a millionaire by investing: 5 investment strategies of Warren Buffett

Investing in stocks is one of the fastest ways to become a millionaire. Warren Buffett is a good example of a billion dollar investor. To be a successful investor like Warren Buffet, you must first understand his beliefs about the market and his investment strategies.

1. The market is irrational

Warren Buffett believes that the market is irrational. He is often driven by greed and fear. Do you know people who buy when the market is up and sell when the market is down? Or are you one of them? If he has done his research and understands the true value of the stocks he has purchased, he will feel secure and will no longer be worried when prices go up or down.

2. No one can consistently predict the market

Take a moment to remember, have you heard stories about someone spending money to buy mysterious trading systems, hoping to make a nice profit but only to be disappointed? Average investors try to predict the next market move. When they can’t predict, they give money to so-called experts who claim they can. Warren Buffett believes that successful investing has nothing to do with predictability. Savvy investors know that no one can consistently predict the market.

3. High returns with little risk

While many people talk about “high risk, high return,” Warren Buffett believes in high returns with little risk. In fact, Warren Buffett is a risk-averse investor. His first rule for investing is “Never lose money” and his second rule is “Never forget the first rule”. People think investing is high risk because they haven’t learned how to do it properly. Just like driving, don’t you think it’s risky to drive on the road if you haven’t learned how to drive properly? If you know the right way to do it, you can significantly reduce your risk.

4. Invest in a few large companies

Most investors are taught to “diversify, diversify, diversify.” Therefore, they bought many mutual funds and held small holdings in many stocks. Warren Buffett believes that diversification is for people who don’t know better. By investing in the entire market, you will rise and fall with the market. The key to outperforming the market is to identify great companies and focus your investments on them.

5. Make decisions based on strict criteria

Many investors make decisions based on emotions. They are tempted when they hear good advice or see their friends making quick profits. They then sell immediately when they see the stock price drop the next day. Successful investors follow a set of strict criteria to determine when to buy and sell. Investment criteria are rules you follow to decide which stocks to buy, when to buy, and after you buy, when to sell. Here are some examples: business must have growing sales and profits for the past 5 years, return on equity must be greater than 15%, long-term debt must be less than 3 times net profit, etc.