As the world’s top investor, everyone is looking to billionaire Warren Buffett for investment advice. Whether it’s advice on how to get rich, what he is currently investing in, his investment strategies, or even things like the worst advice he received, Buffett is constantly in the news. And much of his advice is misunderstood.
However, while there are literally dozens of different rules, ideas, and strategies that Buffett has perfected (and continues to perfect) over the years of investing, there are some that are universal and should be considered by every investor, no matter how big or small. That top investment rule should be the first thing that everyone who gets into investing should learn, and as with most things Buffett, it’s very simple.
Accept there are things you cannot predict, and be okay with that uncertainty.
Now, if you’re a fan of Buffett and you read the above statement, there’s a good chance that you’re thinking about his circle of competence. While that can definitely apply here, that’s not actually what we’re talking about. Here, what we mean is that, no matter what anyone tells you, it’s basically impossible to predict the stock market with much certainty. It will go up and down with trends, and you have to be ready for that.
In a set of ground rules that Buffett wrote for his friends and family when he began investing for them, Buffett explained it like this:
“I am not in the business of predicting general stock market or business fluctuations. If you think I can do this, or think it is essential to an investment program, you should not be in the partnership.”
With the way that everyone is connected and the constant stream of news, it can be easy to forget that being interested in the short term isn’t going to get you anywhere. That’s why Buffett stays out of Wall Street, actually. He tends to prefer the long view, and investing in things that will produce a steady profit over time is much better than short term constant trading. Strong companies invested for the long term will produce better results and weather the market changes much better than short term.
So, to recap, in today’s rapid-pace world, most investors would greatly benefit from remembering that the market will go up when things are good, and go down when they are not and that’s simply part of the game. No one can predict it, really, so there’s no point. The best thing you can do is invest in companies that you believe in and which are strong, solid choices and know that they will likely weather those fluctuations just fine.