Let us be honest you are probably not going to beat the stock market. Even Warren Buffett does not expect to beat the market. To beat the stock market you would have to reach a return higher than 7,96% according to Investopedia. How to beat the stock market in 2019 is very difficult to say. However, there are guidelines that can be a tremendous help.
Warren Buffett is known as one of the best investors in the world. One thing is that he understands the fundamentals of businesses, he has also found a simple investment strategy to get rich. Warren Buffett’s investment strategy is from Benjamin Graham’s principles of value investing.
Mr. Buffett’s investment strategy is very simple: Don’t buy an overpriced investment, understand what you invest in, but like you would own the entire company, compounding effect, and patience.
So what can Warren Buffett teach us?
Beating the Stock Market
Beating the stock market can be quite hard. Even Berkshire Hathaway’s (Warren Buffett’s company) chief stock pickers have failed to beat the S&P500. So how do we actually beat the market?
Using Warren Buffett’s basics you will get rich slow. While you might not end up being the new Warren Buffett there is a change that you can be financially free if you plan your finances correctly.
Beating the Stock Market in the Within the Stock Market
Using Warren Buffett’s basics I will help you get an understanding of how to secure long-term returns. Warren Buffett can teach us a lot as being the uncrowned king of stock investing.
Pay Yourself First
Mr. Buffett says you should save, save and save. In an interview, Buffett said “I think the biggest mistake is not learning the habit of saving properly early. Because saving is a habit. And then trying to get risk quick. It’s pretty easy to get well-to-do slowly. But it’s not easy to get rich quick.“
When you save your money, you will have an advantage to investing. The more you can consistently save, the more you can consistently invest.
Warren Buffett once said, “Do not save what is left after spending; instead, spend what is left after saving.”. A common mistake is spending your earnings on whatever, so you will have nothing left to save. The best advice will be to send the savings into an investment account that you do not have regular interactions with. E.g. I have automated an index fund purchase each month for a part of my savings money. This way I do not get to touch it as it disappears with my regular budget.
Long term investments
The only way to secure a positive return is to go for long term investments. Historical you cannot lose if you are going for long term investments.
However, it is to say that stock picking cannot be guaranteed a long term positive return. Individual stocks are dependent on a lot of factors. One of Warren Buffett’s advice is also to avoid stock picking as the time needed to evaluate the stocks exceeds the most people have available.
Warren Buffett advises everyone to use index funds of the largest indexes. This will allow every investor to follow the market, no matter if they are good or bad at stock picking. The index funds will secure returns that are equal to the market.
An index fund allows you to follow a specific market. Whether that is the S&P500, NASDAQ100 or any other index, the index is historically determined to bring a ~8% return per year.
Using P2P Lending to Beat the Market
Using P2P lending can be the ultimate stock market beater. You can achieve anywhere from conservative 2,5% from Iban and all the way to 22% on Envestio. P2P lending can hit a wide range of investment opportunities. You can be anything from a property owner to a guy helping out another dude with €30 at the end of the month.
Regardless of the endless possibilities of investments, it is important that you lay out a strategy. While we know that aiming for higher returns typically means higher risk, you should not let a good opportunity go to waste. However, you should be sure that you do not invest everything in a high yielding investment platform.
Platforms like Crowdestor can offer a return of up to 22%. Whereas using platforms like Estateguru or Mintos can get returns of +12% with buyback guarantee in case the borrowers fail to repay the loan. Using a combination of both will allow you to get the sweet returns from Envestio earning you upwards of 22%, with secure loans backed with buyback guarantee from Grupeer or Mintos.
This is of course not to sell you the dream of eternal high returns with no risks. You should consider reading my post on the risks of P2P lending to get a deeper understanding when getting involved with P2P lending (do not worry, it is not that harsh). Read about the risk of P2P lending.
If you need proof that P2P lending actually works, you can go to my monthly income page and select any month to see some sweet returns from multiple platforms.
To beat the stock market an investor must be able to generate a return of 7,96%.
Warren Buffett is an extremely smart man, and he will surely be in the history books for many years to come. Using his basic investment tips it should be possible to follow or even beat the stock market.
If you badly want to beat the stock market, P2P lending platforms are an excellent alternative. P2P lending can enable returns of up to 22% return per year.