The 3 Investing Rules That Allowed Warren Buffett To Reach a Fortune of Over $100B

#2: The best opportunities appear when everyone is afraid.

Warren Buffett has just surpassed a net worth of $100B in 2021. Of course, we're talking about virtual net worth here, since his fortune is based mainly on the valuation of his shares in Berkshire Hathaway, the investment company he created several decades ago.

Still, seeing Warren Buffett reach $100 billion at just over 91 years old is something quite extraordinary.

Warren Buffett's success is all the more incredible because, in the ranking of the richest personalities, we only find entrepreneurs who have invented products or services that have revolutionized the daily lives of tens of millions of people.

Warren Buffett made his fortune solely through his intelligence and science in finding promising companies on the stock market. His success is also a tribute to patience since Warren Buffett had “only” $105K at the age of 20.

At the age of 50, he had already made his capital grow, but he was not yet a billionaire since his fortune was “only” 937 million dollars:

Everything accelerated in the second half of his life, and his long-term investments allowed him to make a phenomenal difference and finally reach 100 billion dollars in 2021.

Behind Warren Buffett's success, there are also 3 fundamental investment rules. These simple rules are all the more important to know at a time in history when we are facing great monetary inflation. By following them to the letter, you will start on the right foot by maximizing your chances of making the fruits of your labor grow.

No one can time the market, not even you

When the markets go up, everything is fine. It's easy to control your emotions, although some people fall into FOMO (Fear Of Missing Out) mode. However, when the markets start to correct, we all tend to stress.

Indeed, seeing the valuation of one's portfolio decrease is not a pleasant sight.

Warren Buffett's recommendation here is simple: rather than keeping your eyes glued to the current stock market prices, you need to remember your initial investment plan, including your investment time horizon.

To protect yourself from short-term market movements, Warren Buffett recommends taking a long-term view based on the following adage:

“Time in the market always beats timing the market.”

Jack Bogle, the founder of Vanguard, one of the world's leading investment management firms, also said it best:

“Time is your friend, momentum your enemy.”

Choose to invest for the long term, and you'll have a much more zen-like adventure in the stock market while maximizing your chances of profit. Patience is your best ally.

The best opportunities appear when everyone is afraid

Warren Buffett frequently says that his investment strategy is for everyone: he buys great companies at affordable prices. Your main job, then, is to be able to identify those great companies and then define what would be an affordable price to buy their stock.

Once you have identified these types of companies, you will find that prices become much more affordable in a bear market.

So it's when everyone else is getting scared that the best opportunities will appear for smart investors like Warren Buffett. He wrote that in his letter to Berkshire Hathaway shareholders in 1997:

“If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the ‘hamburgers’ they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

Be a contrarian investor

Everyone knows the adage “Buy Low, Sell High”. Unfortunately, very few investors manage to come close to this ideal. Warren Buffett explains in a way why when he says:

“Be fearful when others are greedy, and greedy when others are fearful.”

You have to be a contrarian investor to take full advantage of all the opportunities the market offers in stocks. In October 2008, as the subprime crisis was unfolding, Warren Buffett invested heavily.

However, the financial crisis was starting and the stock market had corrected by 40% since its peak. While explaining that he had no idea what prices would do in the short term, Warren Buffett had a deep conviction in his heart: history would repeat itself and the market would one day rebound to new highs.

Warren Buffett was once again right to trust his instincts since an investment of $1,000 at the time is worth nearly $5,000 today. Invested in a money market fund, that same amount would be worth little more than $1,000 today.

Going against the market is not easy. Indeed, it is necessary to know how to control one's emotions and one's mind while all the media propagate alarming messages. It is by winning this mental battle that Warren Buffett was able to achieve such a fortune.

It's in your best interest to win this battle to become a contrarian investor.

Final Thoughts

Warren Buffett's success in the stock market shows us the power of simplicity to achieve great things in the investment world. The initial starting point is to choose the right companies at affordable prices, but the hardest part is to know how to be patient and control your emotions to reap the benefits of your choices.

For this, patience is the key, as Warren Buffett frequently says:

“Our Favorite Holding Period Is Forever.”

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