Warren Buffett’s Top 3 Investment Rules

Warren Buffet has given 2 Basic Investment Rules for everyone who want to be a Successful Investors.

01) “If it seems too good to be true, it probably is”.

There is an old proverb in the Native English and that is “Too Good to be True”. This proverb is about pessimism. It means that if some Investment deal is ‘Too Good’ and offers you unbelievably high return than it may be a Scam.

Say for Example, Maddof’s Ponzi Scheme. The Investment returns from Maddof’s Scheme were unbelievably high. It means it was ‘Too Good to be True’.

in January 2008, The Sensex was 21,000 and Financial Analysts were predicting that the Sensex will touch the level of 28,000 by the end of year 2008. This was “Too Good to be True”.

So the first very important principle of Investment is Beware of Investment deals that sound too lucrative. These may be Scams.

02) “Always look at how much the other guy’s making when he is trying to sell you something”.

This advise is also a very useful advise. It directly indicates towards Financial Advisory Industry. There are lots of Financial advisors available in the Financial market such as Brokers, Agents, Dealers, Stock Brokers & Real Estate Brokers.

Always look at whenever anyone wants to sell you something, How much money that guy is making from you by selling that product to you.

03) “Stay away from leverage.  Nobody ever goes broke that doesn’t owe money.” 

This is the Golden advise ever. I Love this advise very much. This advise says that, Never do Investments with Borrowed Money because Nobody ever goes Broke that doesn’t owe Money.

Let me give you the Examples of Top Most Doctors of Ahmedabad City. During the 2008 Stock Market Bubble, many of them Broke, some goes Bankrupt and few did suicide. Why?…. Because all of these Doctors Invested with Borrowed Money. All of them had taken Leveraged positions in the Stock Market, Crude oil futures and everywhere else.

One Top Most doctor of the Ahmedabad city has lost all of his fortune in Crude Oil Futures. And now he is working in his own Hospital like a Slave because his Hospital has been forfeiture by Banks & Financial Institutions from which they had borrowed Money.

But those people who had not borrowed money i.e. never taken any kind of Debt, came out of the Recession very well. With the Return of the Sensex to 15,000 level, all of the patience Investors and those who had not invested with Leveraged (Borrowed) Money came out/

In short, the above 3 Investment advises by Warren Buffet are the Golden advises. Everyone should follow them.