7 investing habits that made Warren Buffett a billionaire

Investor Warren Buffett has had an incredible career buying stocks. In fact, he’s a billionaire many times over – and a lot of that depends on his strategy when it comes to picking stocks to own.

But Buffett’s approach is hardly a secret. In fact, he revealed many of his thoughts, which means that a small private investor like me can apply some of the same principles when picking stocks for my own portfolio.

Here are seven Buffett habits I hope can increase your own investment returns.

1. Do research

Buffett lives far from Wall Street. He spent most of his working days sitting alone in his office reading. In fact he often reads hundreds of pages a day, including company reports.

Doing a lot of research means that Buffett is educated and knowledgeable. That has been critical to success – and I can do it too.

2. Circle of competence

The Sage of Omaha emphasizes the value of sticking to the circle of competence. They only invest in businesses that they know and can assess.

Applying the same discipline should help me avoid making terrible investment decisions by putting money into businesses when I can’t judge the prospects.

3. Look at the business model

Buffett likes profits. But they don’t just focus on whether the company looks profitable. He asked a question that I think investors should have in mind: does the business have a model that should be profitable in the future?

For example, Buffett owns shares in companies like Coca Cola and American Express because the company has unique brands and assets in a market that looks set to experience high customer demand over the long term. That’s why they have a business model that will hopefully make them profitable in the future.

4. Keep it simple

Buffett tends to stick to companies with fairly simple business models. They also don’t invest in businesses that they think have accounting methodologies that are too complicated to understand.

That means he keeps it simple.

Instead of trying to beat other investors, Buffett likes to take an uncomplicated but proven approach to investing. They try to buy shares in big companies when the price is lower than they thought.

5. Diversification

Even Warren Buffett makes mistakes, though. Indeed, last month he told the shareholders of his company, “Over the years, I have made many mistakes“.

But Buffett always creates a diversified portfolio in several stocks, to limit the overall impact on the portfolio of mistakes. I did that too.

6. Be patient

Buffett says he doesn’t think the stock market will be closed for years.

Does that sound weird? I think Buffett’s point is that he buys stakes in what he sees as significant businesses and plans to hold them for the long term.

These stocks may not often trade at attractive prices — but Buffett has the patience to wait years before investing.

7. Keep calm

Some investors are panicking, others are very stressed.

And Buffett? He has said, “I wouldn’t trade even a night’s sleep for a chance of extra profit“.

I think this is a useful approach for me as a private investor, especially in today’s turbulent market.