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When it comes to building wealth – especially in the stock market – no one knows more than Warren Buffett. And the Berkshire Hathaway The CEO has some advice that I think will be important in 2024.
Over the past week, positive macroeconomic news has driven up stock prices. But I think investors would do well to listen to two pieces of advice from someone who's seen it all before.
Buy low
This is where Buffett's first tip comes into play: “Never count on making a good sale. “Let the purchase price be so attractive that even a mediocre sale gives good results.”
I think this will be especially important in 2024. In a bull market, with stock prices rising, it is easy to buy a stock simply because it appears to continue rising in the hopes of creating wealth.
Although this is risky. There is nothing certain about interest rate cuts in 2024 and neither the UK nor the US have met the inflation targets set by central banks.
That means there is a chance that prices could drop at any time, making it difficult to sell for a profit. And if that's how I plan to make money when I buy stocks, then I'll be in trouble.
The alternative is to buy shares for less than their intrinsic value. That way, investors like me don't have to rely on getting an inflated price to make a profit by selling.
Stick to what you know
There is a second principle that I believe will be no less important in a year in which artificial intelligence (ai) stocks are likely to receive a lot of attention.
As Buffett says: “The risk comes from not knowing what you're doing.”
When it comes to investing – especially building wealth – it's easy to think that the way forward is to determine what the next big thing will be and try to get ahead of it. But this can be dangerous.
I believe in the ai movement; I don't think it's just a fad. It's hard to think this after seeing the investments. microsoft and Alphabet they are doing in the sector.
However, it would be a mistake to think that you should go out and buy shares of an artificial intelligence company. Since I'm not a computer scientist, I don't know what to look for, which makes it risky for me.
Buffett has created wealth by investing in simple businesses: the value of Berkshire Coca Cola Investment has gone from $1.3 billion to $25 billion. I think this will be crucial in 2024.
Invest in 2024
It seems that investors are expecting a good year for the stock market in 2024. And the longer they wait, the more stock prices rise.
However, in these types of conditions, I think it is important to follow the advice that Buffett gives. The key will be to stick to companies you can understand and buy them at decent prices.
