Warren Buffet’s tips on business and financing

Warren Buffett is known among investors as “the oracle of Omaha”. Presidents bow to his opinion, and he comes up as a role model for the best financiers of the country. In his books, the investor has given a lot of useful tips on how to become a rich and independent man.

Borrow wisely

Instalments, credit cards, mortgage loans are bank instruments that are able to turn a free and ambitious man into a slave of the financial system. Warren Buffet recommends thinking twice before taking a debt burden. Extra loans will lead to such situation, when your loan payments exceed the actual income. Not everyone can climb out of debt.

Pay yourself first

Warren Buffett believes that the accumulation of money is the basis of financial well-being. Saving money is necessary from the moment when you receive your first monthly income. Deposit the sum, and then spend your money on daily needs.
Beginners often make the same mistake: first, pay their bills and spend the money on everything they want, and then try to save some capitals on the remaining chicken feed. This approach is fundamentally wrong. Remember, the first step is to divide the income into two parts: the one you want to save, and the other that will be taken to pay the bills. The first part is untouchable, while the second can be used at your discretion.

Abandon bad financial habits

Few people realize that their lifestyle does not conform to their life goals. Examine your own spendings. This will help you to determine how much money you actually spend, and how much remains for the future. In order to move in the right direction, learn how to set financial priorities. You will find out, that you have some spending patterns, which you can abandon without regrets.

Draw a distinction between price and value

When investing, Warren Buffett is guided by the advice of the well-known financier Benjamin Graham. He believed that the price and value are different concepts. Price is the amount of money that you pay for a product or service, and value is a set of benefits that you get in return for the money paid.
Mr. Buffett uses money rationally and never pays more than the company deserves. It is noteworthy that this rule applies both to business section, and household economics. You should not buy valuables for a jaw-dropping price and overpay. At the same time, the statement does not say that cheap goods are always good. The next time you go shopping, look for the last parameter. Is the product actually congruent to its price or you pay for a nice advertising slogan?

Everything has its price and value.
Everything has its price and value.

Investing is not as difficult as it seems

There is one simple rule, which is rarely referred to in the books on investing: after investing small amounts to a tracker fund for 10 years, you will find yourself in a better position than those investors who prefer to invest large sums at once.
Warren Buffet believes that everyone can invest. However, before the start, the newcomer should thoroughly examine the following aspects:

  • Learn the terminology of investing.
  • Register as a broker and open a brokerage account.
  • Select VFINX as an index fund.
  • Invest a sum to the fund.

Choose long-term investment

Long-term investing has always been and will be more reliable than the short-term one. The experienced investor urges newcomers to invest in a long range. It is very simple to go bust on constant share price fluctuations, while long-term investments can be properly planned.
It is necessary to distinguish traders and investors. The former seek to earn on speculative courses, the latter analyze micro- and macroeconomic factors. When buying stocks, you should be aware that they can stay in your hands for 5-10 years. If you are not ready for such a step, then do not try to invest in assets even for 10 minutes. Buy only the necessary shares, the cost of which has been growing throughout the last 10 years, analyze the share bazar news. When the investment portfolio is set, you can forget about share for some time. The course will change regularly, both for the better and for the worse, but you should not get worked up and worry about this.

Money is not a goal in itself

The billionaire urges not to reduce the meaning of life to money. The crucial things in life are not things. It is much more important to look after your health and maintain good relationships with friends. The most successful and wealthy investor in the world is guided by such principles. He believes they are the fundamentals of success.

Economic stories: 1 bill dollars on e-commerce

The second online store by revenue in the US, Newegg, is not so popular among mainstream audience. Its CEO, Fred Chang is even less known. He made it a rule not to talk to the press. And he continues to follow it even now, when success of the company, established in 2001, turned the businessman into a billionaire.
Meanwhile, he clearly has something to tell: in 2012 Newegg revenues reached $ 2.8 billion. According to this indicator, the company trails only the absolute leader in the industry, the online store Amazon, created by Jeff Bezos. According to business world articles, Chang’s share in Newegg is more than 30%. If we compare Newegg with the competitors like Amazon and Overstock.com and apply the price/revenue multiplier, the businessman’s financial position can be estimated exactly $ 1 billion.
Through a spokesperson, Chang declined to confirm or deny these findings. And it is not surprising: since the foundation of Newegg, the entrepreneur, who, according to Forbes, is now 56 years old, has not given a single interview. Despite this, something about him we yet known.
A native of Taiwan, Chang has a bachelor’s degree in applied mathematics, which he got in the Chinese Culture University in Taiwan. Newegg is not the first company of his. Before it he had ABS Computer Technologies. Chang is a naturalized citizen of the United States, who, however, prefers to live at home in Taiwan, as the sources close to the Newegg say.

Gamers and programmers are major customers at Newegg.
Gamers and programmers are major customers at Newegg.

How did Chang achieve such impressive success in e-commerce? Newegg, which headquarters are located in the suburbs of Los Angeles, has gamers, programmers and other individuals involved in the IT-industry as its target customers. These 18 million customers buy mainly computer hardware and software. This audience is loyal to the brand Newegg. Online store reciprocate by sponsoring IT-events and game tournaments.
According to the research editor of the magazine Internet Retailer, the most astonishing thing was the Newegg’s achievement of $ 1 billion revenue in the fourth year from the company’s foundation.
Now the growth is more restrained: in 2012 the revenues of the online store increased by only 4%.
What can we expect from the retailer in the future? Experts assess the prospects for Newegg ambiguously. Some analysts think that Newegg must keep up the market growth of 10-12% per year, otherwise their proportion will decline.
However, there is no confidence that Chang’s progeny will maintain this pace. With a high level of service and flexible price line, the retailer clearly lacks Amazon’s awareness. They rely too much on marketing through search engines. Outside the devoted circle of customers the brand of Newegg is still poorly recognized.
Realizing this, Newegg attempts to win new users in new regions. The company’s motto, which boosts the global promotion of the brand, sounds very simple: “Once you know, you Newegg”.
When the retailer has submitted documents for the preparation of IPO in the Securities and Exchange Commission in 2010, the materials defined: “Our growth plan depends on the success of the business expansion in China, where e-commerce is still in its infancy.” These hopes did not come true: the Chinese Internet market was divided between Alibaba and Suning. Newegg suffered losses.
However, the company was not discouraged. The head of China’s subsidiary of the retailer said in an interview with local media that Chinese Newegg should earn at least $ 480 million, which will help it to become profitable again.