Today’s Smart Investor tip comes from billionaire investor Warren Buffett, who outlined
the biggest mistakes amateur investors make for
Adam Shell at USA Today.
The Oracle of Omaha warns investors against an incredibly common mistake: You shouldn’t try to time the market. He says it’s a mistake to predict or listen to others who predict the short-term movement of stocks. By the same token, he says you shouldn’t try to flip stocks like high-frequency traders do.
Instead, Buffett says the best thing the average investor can do is buy an index fund over time. That’s it. From USA Today:
“You don’t need to look at the prices of the stocks you own from week-to-week, or month-to-month, or even year-to-year,” says Buffett. “If you own a cross-section of American businesses, and you don’t get excited (and buy) just at the very top, and if you buy in over time, you are going to do well.”
As Shell points out, Buffett has become one of the world’s wealthiest people by following extremely simple philosophies. He buys into solid businesses that he can easily understand and holds onto the investments for long periods of time. According to him, doing decently well in stocks is “very, very easy.”