DotBig review: 3 investment rules of Warren Buffett

3 investment rules of Warren Buffett

1. Selling put options

Buffett put the biggest emphasis on blue-chip stocks. Some investors might think that because of this they should avoid complex derivatives. However, this is a big mistake. To achieve such success in investing, Warren Buffett also used an innovative technique of options trading, which is focused on selling naked put options. According to the annual report of Berkshire Hathaway published in 2007, the company had 94 derivative contracts, which generated $7.7 billion in premiums.

2. Investing in small-cap stocks

When we talk about companies with small market capitalization we have to specify that these are the ones worth from $300 million to $2 billion. Today, Buffett says that he has to look for “elephants, not for “mosquitoes”, even though that might seem more attractive in the early days of a company’s operation. However, in the beginning, this was quite different than today.

3. Cutting losses when necessary

No one is perfect, and even such a big name as Warren Buffett can sometimes make mistakes. The reason he became such a successful investor is that he can admit when he is wrong. He realized that the performance of the company might change due to the management of the company choosing another strategy of development. When he realizes that this new strategy might bring losses, he tries to cut these losses.

Conclusion

DotBig specialists would like to conclude that you cannot become rich overnight — investing is serious work that requires patience and commitment. We hope that these 3 rules of the world’s most successful investor will help you to make wiser decisions.

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DotBig Forex broker Reviews

DotBig Forex broker Reviews

The official online Forex account broker DotBig is a platform for online trading.