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4 Warren Buffett’s Law For Investing In Volatile Markets

The corona crisis has caused the world’s financial markets to go through one of their worst periods. The prices of basic assets such as oil, gold, stocks and even bitcoin are not calm and go up and down strangely. 

In this article, with help an article From Anupam Chugh, we learn about the four rules of Warren Buffett, the legendary financial market investor, for investing in volatile markets.

Law 1

Buy something that you would be happy to keep if the market was closed for the next 10 years

Warren Buffett always looks at the intrinsic value of assets. Also, he never invests in companies or firms that do not understand their efficiency and purpose. Perhaps this is the reason why he stays away from the shares of technology companies [orBitcoin] Be for a long time.

According to Baft, there are several key indicators for choosing a stock: knowing the company or firm, its business model, analyzing the fundamentals of the company, and evaluating the company’s prospects in the long run, including continuously. Growth, strength and potential for sustainable income and financial calculations. He prefers to work with honest, transparent and trustworthy people he can rely on in the long run. Equity is like buying a business. It is very important to do research and list personal metrics when choosing stocks. As Baft says:

The risk is that you do not know what you are doing.

Warren Buffett usually avoids short-term investing strategies and always pays attention to the buy and hold approach. He is looking for quality assets, especially when the price is lower than the real value.

Law 2

Do not follow the market too much

The market can fluctuate like a wild animal. Not surprisingly, the various phases of this market are known as “bears” and “cows”. It is natural to be a little anxious and worried about your portfolio when the market is declining. Decreased desire for declining assets and perhaps a reluctance to buy on the floor are instinctive moves.

An unstable market, like the current market, can be very worrying for the investor. But it is very important to stay calm and not be affected by daily market changes. Excessive focus on the hourly and daily performance of investments can have psychological effects, such as anxiety, and ultimately lead to poor decisions.

As Warren Buffett In an interview with CNBC, he said:

People who try to buy and sell stocks and worry about the slightest drop in price, and who are constantly waiting to sell when prices rise, do not get very good results.

Valuable companies usually perform well over long periods of time, such as 10, 20, or 30 years.

Investors with a long-term approach should not worry about falling markets.

Law 3

Fear when others are greedy and be greedy when others are afraid

Markets are controlled by emotions, and greed and fear are at the forefront of these emotions. An investor should be wary of what is being advertised among friends, the community and the media.

This is one of the most basic operational principles used by Warren Buffett. Greed, as one of the main reasons, causes a sudden rise in stock prices, and fear, as another reason, is partly responsible for the downward spirals in the stock market. According to Buffett, blindly following groups (even if they are large) in investment decisions is not a good idea. This story of blindly imitating people is the same old tradition of buying when it is expensive and selling when it is cheap. Instead, think of these as actions that you must take on a regular basis.

The next time someone tries to persuade you to buy or sell an asset, take a step back and look at it from a neutral perspective. Do your own research when shopping. Do not withdraw your capital easily when the market is broken. Paper losses are not real. The market is improving.

Law 4

Always have cash with you

As Baft rightly said:

Cash for businesses is like oxygen for people: when it exists, we never think about it, but when it does not exist, it is the only thing that occupies our minds.

Warren Buffett has always spoken of the importance of personal financial management and the need to practice good habits; Habits such as sticking to a budget, investing, and saving regularly from a young age.

Having cash is very important in difficult times, because it creates a sense of security. Warren Buffett is always cautious about using credit cards. His advice is to keep some emergency capital to avoid getting into debt. Also, if profitable transactions occur, cash will allow us to take advantage of this opportunity quickly.

last word

No one knows what the effects of the corona virus will be on the world and the market. We hope that the principles presented to you by the King of Investment can help you make the right decisions and benefit you in this volatile market.