Retire rich with Warren Buffett tips: It is definitely possible. Of course, whether one should follow the Omaha Oracle in every investment decision is another question. If in doubt, it is probably enough to adapt parts of your approach.
For today, I’ve picked two terms that could be particularly important for you and your rich retirement. Namely Circle of Competence as well as timeless, cash flow strong companies. What they can mean for you, so let’s get a little closer now.
Warren Buffett tip for rich retirement: Circle of Competence
You probably know the Circle of Competence as the first tip from Warren Buffett. Behind this term hides the knowledge that every investor knows certain things and market areas and does not know them. The oracle of Omaha is convinced that you can only make good investment decisions in a company-oriented manner where you know your way around.
But how does this Warren Buffett Circle of Competence tip help you retire rich? Quite simply: By thinking about making really good, timeless and better investment decisions with a view to the risk-reward ratio in a group of competencies. The star investor, for example, is also convinced that successful investing is not to lose money. This is also an important quality for a rich retirement.
We should also keep in mind that identifying good companies can generate solid returns over many years. Benefiting from good companies for as long as possible nourishes the interest and compound interest effects. Over the years and decades, it’s such solid returns that make you retire rich. Even if there can of course be more returns with more risk, a safe, conservative approach that relies on simple, good companies can achieve something special over years and decades. For a rich retirement, this Warren Buffett tip with regard to one’s own area of expertise is therefore worth gold.
Timeless, cash flow strong companies
Warren Buffett also prefers to invest in timeless, cash flow companies. He doesn’t really give this tip to other investors. No, it’s just his approach. But we can also take a lot of it with us. Especially if you want to retire rich.
Timeless, defensive companies often come at a price, of course. Especially when they have quality that is obvious. Still, they can be worth it. After all, there are often companies behind the shares that can continue to deliver solid returns in the future and consistently boost the compound interest effect. In this respect, this Warren Buffett tip also aims at that.
For Warren Buffett, however, a good cash flow company is also a sign that there are strong products or services out there. And that is exactly what can be the basis for retiring richly: Simply benefit from solid cash flows and from the fact that the company becomes more and more valuable over time. Or possibly distributing cash to investors in the form of dividends or share buybacks.
The oracle of Omaha recognized early on that a high, free cash flow brings flexibility and thus the potential to enable further returns or growth. To retire rich, this trait can also be crucial. And best of all: Due to the defensive class and stable cash flows, you wouldn’t even have to change your approach as a retired investor. After all, stocks of this kind are and will often remain timeless.
The article Circle of Competence & Timeless, Cash-Flow-Strong Companies: Getting Rich with Warren Buffett Tips was first published on The Motley Fool Germany.
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