What are the 5 Investments that Warren Buffet Hates? What to Invest in Instead?

By harishsystango
January 27, 2021

Whether you are into investing or not, you must have heard about Warren Buffett – one of the world’s richest personalities, who is a fixed part of Forbes’ list of billionaires. As of December 2020, his net worth is $85.2 billion. Known as the “Oracle of Omaha”, Warren Buffett’s investment tips are widely followed by investors all over the world. 

Now, you must be thinking about how you can invest like Warren Buffet and achieve your financial goals. Here, in this article, we will be covering the 5 investments that Warren Buffet hates as well as Warren Buffet investment tips. But, before that let’s have a look at a brief history of Warren Buffett.

Warren Buffett: A Brief History

Warren Buffett investment tips

Born in Omaha, Buffet is a son of a U.S. congressman who bought his first stock at the age of 11 and filed his first taxes at the age of 13. He started his career as an investment salesperson in the early 1950s and six years later in 1956, he formed the Buffett Associates. In less than a decade, in the year 1965, he was in control of Berkshire Hathaway. Later in the year 2006, he promised to donate over 99% of his wealth. He has donated $41 billion to The Gates Foundation and his kids’ foundations. Warren Buffett and Bill Gates in 2010 announced that they formed the Giving Pledge campaign, asking billionaires to pursue philanthropy and donate half of their wealth to charities.

Let’s now see what are the investment strategies that Warren Buffett hates –

  • Bitcoin:

Warren considered Bitcoin and other cryptocurrencies as worthless. He compares bitcoin with cheques, cheques can be used to transmit money, however, cheques themselves are not worth any money. Buffett sees bitcoin’s value as based solely on speculation. “You can’t do anything with it except sell it to somebody else,” he told CNBC. “Then that person’s got the problem.”

Bitcoin - Warren Buffett stock tips

Buffett repeatedly stated that he will never own any cryptocurrency. And, as per various news, Justin Sun, CEO of cryptocurrency Tron, gifted him a Samsung phone containing bitcoin, Buffet donated it to San Francisco based Glide Foundation.

So, if you are following Warren Buffett value investing tips that cryptocurrency is a big no-no.

  • Gold:

Buffett believes that gold is bearish, which in terms of the Stock

Market means something which is characterized by falling share prices. Warren Buffett doesn’t like investing in gold because according to him, this metal has limited usefulness and it doesn’t produce any income. 

Gold - Warren Buffett stock tips

A few months back there was a news that Buffett’s Berkshire Hathaway has invested in Barrick Gold Corporation. So, did Buffett finally change his mind and invest in gold? Not actually. Berkshire Hathaway didn’t actually invest in physical gold but purchased the stock of the second-largest gold mining company in the world.

  • Treasury Bonds:

Treasury bonds or T-bonds are government debt securities which are issued by the USA federal government. These debt securities have a maturity ranging from 10 and 30 years.

Treasury Bonds - Warren Buffett investment tips

At the 2018 Berkshire Hathaway shareholders meeting, Buffett stated that investing in Treasury Bonds is a terrible investment. According to Buffett, for instance, you invest in 30-year Treasury bonds that pay you 3% interest per year. The Federal Reserve tries to keep inflation around 2%. After taxes, you will be remaining with 0.5% returns when you adjust for inflation. The investment which Buffett considered as terrible in 2018 has gotten worse presently with interest rates historically low and treasures hovering around 1.4%.

  • Penny Stocks:

Buffett says, “It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” So, you can say that penny stocks are something you should never consider investing in if you follow Warren Buffett value investing tips. The company that issues penny stocks often has no proven track record.

Penny Stocks - Warren Buffett investment tips

  • Tech Startup:

According to Buffett, “Never invest in a business you cannot understand.” In the tech sector, Buffett considers sticking only to the big names like Apple, Amazon and IBM. He believes it is not at all a good idea to invest in a tech startup as tech companies lack a competitive advantage. 

When it comes to IPOs, here is what he told investors in Berkshire Hathaway’s shareholder’s meeting, “People win lotteries every day but there’s no reason to let that affect your investing strategy at all.”

Tech Startup - Warren Buffett stock tips

Warren Buffett suggests thinking of the long-term when you consider investing. If you want to adopt Warren Buffett’s value investing tips, then buy stock in companies like Coca-Cola that you would want to own for forever, rather than investing in surging bitcoins.

Besides owning automobiles, trains (BNSF Railway), planes (NetJets), Warren Buffett holds major shares of brands like Coca-Cola, Heinz, Dairy Queen, Wells Fargo, Geico, Berkshire Hathaway HomeServices and more. Thus, there is no point not following or having questions on Warren Buffett investment tips.

5 Warren Buffett Investment Tips to Build your Wealth

  • Invest in yourself:

Warren Buffet suggests investing in yourself because investing in anything else. At The Genius of Warren Buffett hosted by the University of Nebraska Omaha, Warren Buffett was asked if it is good to study investing during leisure time. To this, he replied, “For most people, the bulk of their income is going to come from earning power in their chosen profession. Therefore, from the standpoint of building wealth, free time is better spent sharpening one’s professional skills rather than studying investing.”

And, following his own advice, The Oracle of Omaha enrolled himself in a public speaking course so that he can work on his communication skills with the client. In the nutshell, during the early stage of career, you should try to gain skills that help you build your career instead of simply trying to make more money.

  • Look at quality businesses and not just the stocks:

Warren Buffett said, “When I buy a stock, I think of it in terms of buying a whole company, just as if I were buying a store down the street.” Most investors simply follow successful corporate houses and brands and consider themselves safe in investing them. They don’t spend time analysing the businesses they invest in.

For instance, if you buy a shop, what are all things you will consider? You will analyse the products that the shop dealt in, you will analyse the overall sales of the products, the consistency of sales, competition, how to manage the trends and so on. Similarly, when you purchase stocks, apply similar logic. So, if you want to follow Warren Buffett stock tips, then don’t think that you are buying just a few shares of the company, think that as if you are buying the whole company.

  • Diversification is not always a good idea:

“Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.” – Warren Buffett.

Many investors believe that diversification is a good idea while investing in the stock market, however, Warren Buffett tends to disagree with this idea. As per Warren Buffett stock tips, diversification is for the ones who are a novice in investing, an experienced investor should consider investing in long-term stocks.

Investors generally diversify their investment portfolio because they are afraid that anyone might sink their portfolio, but when you do so, it becomes difficult to keep your focus on individual investments. If you are following Warren Buffett Investment tips, then don’t diversify your investment portfolio.

In addition to this, excessive diversification means that the portfolio is invested in different businesses, which dilute the impact of its high-quality holdings.

  • Check a plethora of stocks and look for high bargains:

If you want to invest like Warren Buffett, then avoid investing based on the stock tips or recommendations. The most successful investor ever suggests to do your own research and analyse a plethora of stocks before you actually pick the one to invest in. The key to investment success is buying the right stock at the right price.

It is really difficult for individual investors, especially the ones who are new to investing to analyse thousands of stocks and find out the right time to buy a stock. If this is the case, you can outsource the portfolio management to a professional wealth manager or financial advisor.

  • Prepare quality stocks over cheap stocks:

A lot of people buy stocks that are cheap, without even understanding that cheap is not always better. Buffett discovered that “buying a great company at a fair price is far better than buying a fair company at a great cost.” 

So, if you want to invest like Warren Buffett, then consider investing in quality stocks. Chances of losing money in cheap stocks are very high compared to investing in fairly valued stocks.

Conclusion

Warren Buffett is more of a buy-and-hold investor, so if you want to invest like Warren Buffett, then firstly do thorough research and just don’t trade, but invest. Find companies you like and you would trust and then wait for the right price. Also, when you are planning to invest, stay away from “the hot stocks”. Remember this pro Warren Buffett stock tips – “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”

 

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