Warren Buffett has said many memorable quotes over the decades. And its track record demands that investors pay attention.
One of his most famous words is:
“The first rule of investing is not to lose [money]. The second rule of investing is to remember the first rule.
Buffett made the comment to emphasize that if you buy stocks well below what the company is actually worth, “you can’t lose.”
But anyone who has dabbled in ASX stocks knows that it really isn’t that simple.
So to complement Buffett’s advice, Marcus Today founder Marcus Padley recently wrote his top 10 tips for not wasting your money.
1. Beware of gurus
Beware of market and stock commentators. Do your own research and make your own decisions because no one really knows what the market or any particular stock will do.
The catch is that market commentators exist because they want to sell you something.
“It is a human need to be able to answer unanswered questions and we do this by deifying someone or something,” Padley said on the Marcus Today blog.
“In our search for answers to the unanswered questions of the stock market, we attribute to our commentators far more power than they could possibly deserve or possess. And dangerously, whoever guesses the most sells the most.
2. Don’t pretend to be Warren Buffett
Padley urged investors to avoid salespeople who claim to emulate what Buffett has done or will advise you how to do it. Such attempts have cost investors more money over the years than they have brought in.
“No one has ever been able to replicate Warren Buffett’s performance. If they had, they’d be running a fund, we’d all be invested, and we’d all be billionaires as well,” Padley said.
“But there are no funds. Because it’s just marketing.
The idea of investing the “Buffett way” is a huge boon for financial marketing — but it’s all a lie, according to Padley.
“Buffett sells. The second best investor in the entire world, and the other 98 below that we have never heard of. Because they don’t sell.
3. Leave your greed at the door
Padley called investor greed the “biggest killer of them all.”
“Going into the stock market with greed is like running into a battlefield in a bright orange vest. We’ll get you.
4. Set realistic expectations
It is important to set realistic goals to invest wisely.
“Expectations. The root of all happiness. The root of all unhappiness,” Padley said.
“Expect the unexpected and expect the inevitable. Better to expect the expected.
5. Avoid laziness
Padley said there was “more money lost through laziness than through mistakes”.
The active maintenance of its portfolio is mandatory for satisfactory performance.
“There is no easy path to wealth in the stock market,” he said.
“There is no free lunch – effortless participation is not enough.”
6. Ignore so-called “inside information”
If someone whispers a good tip to you, think about their motivations first.
Padley recalled a profound comment from a veteran investment professional:
If I had never received inside information, I would be a million pounds better off than I am today.
Anyone offering inside information is doing so for their own benefit, not yours.
“The only reason people pass on information like insider information is because they want you to buy what they just bought to drive up the stock price so they can sell. .”
7. Initial public offerings
Retail investors have often complained about the lack of access to highly sought-after initial public offerings from companies about to list on the ASX.
Padley recommends thinking carefully about the motivations for a public float, especially for mediocre businesses.
“IPOs are not a route to gold. Most of them are insiders selling their business to you for the highest price they can get,” he said.
“The golden rule of IPOs is that if it’s good, you won’t be offered it. If you’re offered it, you don’t want it.
8. Avoid leverage
Leverage refers to borrowing money to invest.
Padley points out that it’s marketed as a way to boost returns, but investors should be aware of the flip side.
“It works both ways. You also lose much faster.
This means that leverage only works once in a while and it’s hard to be in the right place at the right time.
“It only works when you’re right [with the stock pick] and with average stock returns after interest, transaction costs, inflation and taxes close to zero, you better be right at the right time. »
The loan can only be used regularly if the investor has a “massive financial cushion”.
“Any broker will tell you, this is for confident (or overconfident) traders and for it to work they need to trade at the right time – not all the time. That’s a big ask for someone who has a day job.
9. Don’t confuse confidence with future performance
Is the primary function of the financial industry to make money for customers?
No, according to Padley. It’s marketing. Sell success.
“When it comes to marketing, the losers are kryptonite. But luckily, investing is seen as an intellectual pursuit, so the winners make noise while the losers, conveniently, walk away,” he said.
“And thank goodness for that. Imagine how many products would be sold if they didn’t.
10. Remember your life outside of investments
Padley reminded investors that there are more important things in life than your ASX shares.
“They say there are three foundations to spiritual and financial happiness and success: your relationship, your job, and where you live,” he said.
“If you get one of them wrong, they all go wrong. No mention of the scholarship there.
The stock market is not life, and it should never be “just a side issue”.
“The biggest financial decisions you will make in your life have nothing to do with the stock market – like getting married, divorcing, having children, investing in your home, and engaging in your career or business,” said Padley.
“These are the most important financial decisions you can make. Take care of them first. The stock market comes second.