Investing can be distressing for beginners, especially when a lot of money is involved. It’s difficult to know who to trust, so I think it’s best to take advice from well-known investors like Warren Buffett.
The Oracle of Omaha has successfully built a multibillion-dollar empire using rules that he adheres to religiously.
Here are two I believe could help me be successful too.
Invest for the long term
One of Buffett’s most famous quotes is: “Our favourite holding period is forever.”
Of course, holding until death might not seem like the best way to enjoy returns, so this should be taken with a pinch of salt. This little piece of advice simply means to remain invested long term. Trying to profit from constantly buying and selling seldom works better than holding good stocks for decades.
Panic-selling (selling when a stock drops) is often a mistake, as the stock often recovers to even higher highs. But that doesn’t mean never sell – even Buffett sells stocks when he feels the company is no longer a good investment.
The trick is choosing the right stocks. Which takes us to his next gem of wisdom.
Invest in what you know
Another one of the Oracle’s famous quotes is: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
He wrote this in a letter to his shareholders, clarifying that they should only invest in companies that are easy to understand. They should also be almost guaranteed to have a higher share price in 10 years from now.
In other words, don’t jump into a stock because it’s the flavour of the month and might deliver some quick gains. Investors should look for stocks in an industry they understand (maybe the one they work in) and carefully evaluate the long-term prospects.
One stock that fits the bill
One UK stock that I believe fits these criteria is Unilever (LSE:ULVR). It’s been on my radar for quite some time now but I’ve been distracted by more promising growth shares. However, Unilever is just the kind of solid, reliable company with potential for long-term growth.
It’s not exactly an industry I work in but it manufactures and markets a ton of household brands that I use daily. Think Dove soap, Flora margarine, and Surf washing powder. These are consumables that are likely to be in high demand for the indefinite future.
While the share price has grown 532% in the past 30 years, recent performance has been less impressive. The share price has declined since 2019, down 8% in the past five years. Inflation has hit the firm hard, forcing it to raise prices and driving some (but not all) customers to cheaper alternatives. And earnings per share (EPS) has declined by almost 6% per year for the past five years.
But I have faith in the stock long term. Unilever has been doing well to retain customers at higher prices recently. Interest rate cuts that may come this year should see consumers return to their favourite brands, helping to reverse declining profits. I think I’ve put it off too long so I’ll be adding it to my portfolio when I have cash.
I’ll hold for the long term and invest in what I know!
The post Unsure how to invest? I’d follow these 2 pieces of advice from investing genius Warren Buffett appeared first on The Motley Fool UK.
5 Shares for the Future of Energy
Investors who don’t own energy shares need to see this now.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.
While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.
Open this new report — 5 Shares for the Future of Energy — and discover:
Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
How to potentially get paid by the weather
Electric Vehicles’ secret backdoor opportunity
One dead simple stock for the new nuclear boom
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
I think these FTSE 100 stocks are amazing investments for powerful passive income
With £1,000 to invest, should I buy growth stocks or income shares?
Is this forgotten FTSE 100 hero about to make investors rich all over again?
I’d learn for free from Warren Buffett to start building a £1,890 monthly passive income
I’d build a second income for £3 a day. Here’s how!
Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
