Warren Buffett

7 Steps To Invest Tiny Amounts of Money According to Warren Buffett

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Starting with a small amount of money and investing it for the future can lead to significant wealth over a long period. One of the best investors of all time, Warren Buffett, always talks about this. He has a network of over $139 Billion, and his strategies are something people should note. Here are seven steps to invest small amounts of money to create large wealth. 

1. Start Early

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The power of compounding interest cannot be overstated. The longer your time horizon, the more your money can compound. Buffett tells people to start investing as early as possible. He makes the analogy of a snowball rolling down a hill: “The trick is to have a very long hill, which means either starting very young or living… to be very old.”

2. Don’t Worry About The Fluctuations of the Market

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As the market fluctuates, many people get scared and may sell their positions. If you want to be a long-term investor, you should look for good companies with a reasonable price and believe in them. The market will have fluctuations. Buffett says, “If you’re going to do dumb things because your stock goes down, then you shouldn’t own the stock at all.”

3. Value Over Hype

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Buffett advises investors to invest in well-valued companies. He is famous for being a Benjamin Graham student and learning the ways of value investing. He said, “Price is what you pay; value is what you get.” He has lived by these words as he has created his considerable fortune. Find good quality, reasonably priced companies, and you will do well. 

4. Small Companies With Little Money

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Warren Buffett started investing in small companies when the value was there. As the companies grew, so did his money. Most people look at some large-cap companies to start investing their money, but they could often have a higher price point to purchase the stock. Apple Stock is around $170, and shares of Costco are sitting at $713. If you are looking to get started somewhere, these are great companies, but with little money, it is hard to start investing in them. 

5. Diversify But Not Too Much

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When creating a portfolio, putting all your eggs into one basket may not be the safest thing. Diversification helps to level out the ups and downs. Buffett says, “ Diversification may preserve wealth, but concentration builds wealth.” 

If you know what you are doing, it may be better to concentrate your wealth in a few companies, but the less you know, the better to be more diverse. Many people do not know as much, so it would be better to choose an ETF and get more diversification. 

6. Work Hard

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Blue-collar people know the value of working hard. You do the work, and it feels like a success after all. That is the same as investing with a little bit of money. Buffett talks about finding your passion so you will never have to work a day. The passion motivates you to work hard. As you invest with little money, the motivation to invest more and more can help you work harder to earn more money. It is those goals in life that push us to achieve the impossible. 

7. Don’t Follow the Crowd

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Many people follow the crowd with different fads and things that seem very trendy. Bitcoin is a fad that comes and goes every couple of years. Then you have the stocks that flare up like Gamestop and AMC a couple of years ago. Following the crowd makes you more likely to lose your money. 

He says, “be fearful when others are greedy, and be greedy when others are fearful.” It makes sense; many people follow the crowd and will get greedy when others are making money and losing money. 

You Don’t Need a Ton of Money to Start Investing

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Warren Buffett made a ton of money by investing his money. Through his wisdom, we learn about how to make money and invest it wisely. Learn from him and make some wise decisions with your money. You can always just invest in some simple ETFs like SPY or VOO and do well. 

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