Buffet's Tips to New Investors

One of the things I really like about signing out of my hotmail account is going to the MSN homepage and taking a look at the top stories. Every once in a while I happen upon something that catches my interest, now-a-days it's usually something about real estate or investing.

In this article by Brett Arends of the Wall Street Journal Buffett gives new investors 6 great tips. Below are a few highlights of those tips.

1. Stay liquid. "We will never become dependent on the kindess of strangers," he wrote. "We will always arrange our affairs so that any requirements for cash we may conceivable have will be dwarfed by our ouwn liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earning from our many and diverse businesses."


2. Buy when everyone else is selling. "We've put a lot of money to work during the chaos of the last two years. I's been an ideal period for investors: A climate of fear is their best friend...Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble."


3. Don't buy when everyone else is buying. "Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance," Buffett wrote. "The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying."


4. Value, value, value. "In the end, what counts in investing is what you pay for a business -- throught the purchase of a small piece of it in the stock market -- and what that business earns in the succeeding decade or two."


5. Understand what you own. "Investors who buy and sell based upon media or analyst commentary are not for us, "Buffett wrote.


6. Defense beats offense. "Though we have lagged the S&P in some years that were positive for the market, we have consistently done better than the S&P in the 11 years during which it delivered negative results. In other words, our defense has been better than our offense, and that's likely to continue."

Click here to see the full article.

For the letter Buffett wrote to his shareholders that this article was written from, click here.