Investing properly involves quite a bit of strategy and foresight, and so it’s no surprise that everyone is looking for advice from Warren Buffett on investing and how to make money. And, while there are plenty of quotes and investing advice that Buffett has dispensed over the years, sometimes knowing what not to do is more helpful than what you should do.
So, with that in mind, here are three things that the great Mr. Buffett himself refuses to do—and maybe you should, too.
1. Invest in businesses whose futures are impossible to evaluate
If you don’t understand an industry, then investing in businesses in that industry is a gamble, at best, as you can’t predict where the market will go and what will and will not make a business a good long term investment. This is especially true in up-and-coming industries. If you understand it, you can really make a lot of profit, but the risks are also extremely high.
2. Have too much management
Anyone who has ever worked for a corporation will understand this. Having layers upon layers of management and committees is not the way to get things done. While it’s important to invest in businesses, not the management, it’s important to invest in things that are already working. Buffett often leaves the management exactly as-is, and simply places his own offices above the management for additional support.
3. Depend on the kindness of strangers
There is nothing that is “too big to fail” and it’s important to remember that. Buffett has spoken many times about the dangers of credit, and in his 10 Ways To Get Rich, Buffett recommends limiting what you borrow. According to the Motley Fool, Buffett keeps around $20 billion on hand for Berkshire just in case of emergencies, and it is one of the reason that the company fared so well during the recent financial crisis.
So, in brief, it’s important to know where each company stands, invest for the long term, and don’t spend more than you have.