3 Warren Buffett investing tips I wish I knew before Brexit

With Brexit creating huge FTSE volatility, the wisdom of Warren Buffett has never been more vital. I wish I’d learned this sooner.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If you’ve got money invested in the UK stock market, you need to hear these Warren Buffett tips.

He knows that when times are tough there are big gains to be made, if you can identify the right shares to invest in. So what are the most important things we need to know? How do we pick the stocks to make a million?

Bad news is an investor’s best friend

When markets are volatile it means one major thing: there will be good companies going cheap. When all the dust has settled on the other side of Brexit, aggressive investors who bought solid companies at bargain prices will win again and again.

I’ve made the mistake of checking my portfolio too often, feeling the pain of dipping markets and the creeping urge to get out. But I’ve always regretted it, every time.

A FTSE 100 7% dividend stock like Aviva, for example, will continue making long-term profits and paying out to investors, no matter its short-term costs or the price of the pound.

Fears regarding the long-term prosperity of the nation’s many sound companies make no sense,” Buffett wrote in a 2008 op-ed for the New York Times. In the midst of an economic crisis, Buffett was buying. Or, more accurately, he was waiting in the wings with cash on hand, waiting to snap up companies on the cheap. “Most major companies will be setting new profit records five, 10 and 20 years from now,” he said.

Ditch debt to buy well

Happily, the secret of Warren Buffett’s investing success is no secret at all. Had I learned it sooner, one tip that would have made me richer would have been to ignore companies with lots of debt. On a balance sheet, this is usually referred to as ‘net gearing’, which is the company’s debt-to-assets ratio.

Heavily geared companies have free cash flow sucked out of the business on a daily basis and come with a big red flag. Any gains are built on the sands of debt. The piper must be paid in the end and likely at investors’ expense.

When I recommended British Land a few months back, I noted it only carried a 25% net gearing, low for a real estate investment trust. The pressure of paying back short-term debts won’t hold up other investments or income streams.

Ignore the noise and think long term

When you look back at your portfolio a year from now, you’ll be cursing if you let yourself make emotional short-term decisions.

If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes,” Buffett wrote in his 1996 letter to Berkshire Hathaway shareholders.

Those 10 years will take us into 2029, through Brexit, probably two, three or more Prime Ministers, and perhaps even a World Cup-winning England team (a man can dream, can’t he?).

Any short-term downturn in sentiment — how the market feels about future prospects — lets you buy a piece of big FTSE companies at a knock-down price.

Keep your watchlist short, and a little cash in reserve to pounce on opportunities when they crop up. They will crop up. Just wait, you’ll see.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Tom owns shares in Aviva. The Motley Fool UK has recommended British Land Co. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »