6 key investing tips from Warren Buffett to start the New Year on a positive note

With the New Year off to a promising start, chiefly as market indices hit record highs, many investors are on the lookout for appealing investment prospects. Some rely on closed ones and acquaintances for financial advice, others have turned to renowned investor Benjamin Graham’s ‘Mr market’ theory to navigate the unpredictable terrain. Although mastering the stock trade might seem like a tall order, experts such as affirm that understanding the fundamentals is enough to turn a substantial profit. He notably uttered, “It’s incredible how people complicate what is inherently a simple game. However, if they were to reveal its simplicity, they’d lose 90% of their income.” Here are six key investment lessons from for the current year: #1 In his message to shareholders in 2018, he advised investors to pay more attention to the overall health of a corporate group (the forest) and not the individual activities (the trees) it engages in. If the corporate group has sound health, knowing every minute details of the many businesses it operates is unnecessary. #2 He criticized companies that use "adjusted EBITDA" in their presentations to rule out various costs, such as stock-based compensation which managers claim should not be classified as an expense. He used a quote by Abraham Lincoln to emphasize his point: "If you call a dog's tail a leg, how many legs does it have? Four, just because you labelled the tail as a leg doesn't make it one". #3 Highlighting the necessity of maintaining substantial cash reserves, he mentioned that Berkshire holds a vast amount of treasury bills and cash equivalents, pledging to keep minimum $20 billion in cash equivalents to weather any financial storms. #4 In his 2019 message to shareholders, he emphasized the importance of retained earnings, quoting Edgar Lawrence Smith's 1924 book 'Common Stocks as Long Term Investments’. He pointed out that successful industrial firms do not distribute all their profits but reinvest a portion back into the business. #5 He also talked about the importance of rigorous risk evaluation, asserting its key role in Berkshire's insurance business. #6 Discouraging hasty investment decisions, revealed his company held $144 billion in cash equivalents due to lack of attractive investment opportunities. Therefore, he advised investors against investing just for the sake of it and instead wait for an appropriate opportunity. Livemint has emerged as the fastest-growing news website globally, offering a range of benefits including insightful newsletters, real-time stock tracking, and personalized news feeds.