From running a paper route as a young boy to working on Wall Street, Warren Buffett has built a very large personal fortune valued at over $50 billion dollars. As his story is well known around the world, with many seeking to emulate his financial mastery, it’s useful to distil the key wealth creation lessons and strategies used by the “Oracle of Omaha”.

Research

“Risk comes from not knowing what you’re doing”

Buffett has often spoken about the need to do research and know the companies you’re investing in. While his speciality has been investing in the sharemarket, at a more general level, his lesson can be applied to any type of investment or business – always do research and find out as much as you can before you start, whether it’s property, shares, or a new business. Once you’ve done some research and find that you’re a little short on funds, fast loans are a good way of making sure you take advantage of all the investment opportunities that come your way.

Common types of investment to consider:

• Cash & Fixed Interest Investments – one of the most common types of investment in Australia. Types include term deposits and cash management trusts. This is a flexible category since you can access your savings when you need it. It’s also safe, with no risk of losing what you put in. However, returns and capital growth are very low.
• Bonds – loans made to a government or a corporate organisation, bonds are a relatively low risk investment by which you can receive a steady stream of income through interest payments.
• Shares and Managed Funds – when you buy a share, you own a part of the company. Income comes in two forms: when share values grow and when dividends are paid. Shares are the main investment vehicle for Buffett, and while they can create very high returns, investors can potentially lose everything they invest.
• Property – property is a very popular investment vehicle in Australia. One of the great things about property is that you can earn passive income through rental yields as well as capital growth. However, property is relatively illiquid, unlike shares or bonds.

Invest in What You Understand

“Invest in what you understand…don’t go outside your circle of confidence…don’t just buy and sell”

For those that have sought him for advice, Buffett has stressed again and again for people to only invest in what they understand. It doesn’t matter how great the deal may seem to you or how enthusiastic other buyers are about the investment. If you don’t know how it works or why it’s a great opportunity, hold out and stay clear of the investment.

Buy and Hold for the Long Term

“Our favourite holding period is forever.”

Buffett’s investing strategy is to buy and hold for the long term, rather than engaging in short term buying and selling. Tremendous value is largely gained over the long term (10 – 20 years), rather than the next six months. Accordingly, in building wealth, you don’t worry about cyclical dips or temporary market downturns, but keep your eye on the bigger picture. Again, this goes for any type of investment. Invest for the long term! Cash loans are an easy way to enhance your investment funds if your pool of savings falls a little short of what you need to grasp a good wealth building opportunity.

Keeping it Simple

“All Investing is Laying Out Money Now to Get More Money Back in the Future”

When defining investing, Buffett has stated that it’s just about laying out money now to get money back in the future, after accounting for inflation. His point is that parts of your own wealth building strategy will probably be complicated, but never lose sight of the basic principle behind successful investing and wealth creation – keeping it simple.