With a net worth over $66 Billion, Warren Buffett is known as the most successful investor in the world. He had a knack for business at a young age, and with the right mentorship, hard work, and a little bit of luck, he revolutionized the way that Americans understand investing.

Being an investor, philanthropist, and business magnate, Buffett is currently the CEO and largest shareholder of Berkshire Hathaway and among one of the richest people in the world. Many of his strategies and philosophies behind investing can be generalized for all people to make wiser and more effective investments. Whether you're saving up to buy a house, planning for retirement, or just want some extra cash, consider these three principles as you invest your money.

1. Be Frugal

Warren Buffett achieved his mountain of wealth by making successful investments, saving his money, and re-investing it over time. He is known for being humble; even in his early days as a millionaire Buffett showed no signs of hubris or grandiose. This is unique in some regards given the behavior you see from others who yield a profit from investing. For every successful investor, there are a handful of people who make money and then spend it just as quickly. Being rich is not a permanent condition unless you make it permanent. Buffett has shown that the biggest mistake a person can make when trying to accumulate wealth is to spend it frivolously. While he was well off for most of his life, Buffett hated to waste money. He had bigger goals and knew that the million dollars he made early on would be all for nothing if he used it to buy a new car or boat. Buffett was patient and hedged his bets over time while saving money to reach the pinnacle of wealth he eventually achieved. There are many benefits of being frugal for saving money and accumulating wealth.

2. Invest in Your Future

Buffett stresses that investing in tax-deferred retirement savings accounts like a traditional or ROTH IRA are promising and easy ways to increase net worth over time. On the chance that you don't have what it takes to become an investing tycoon like Buffett, then rather than roll the dice, you can opt for the safer route and sock away your money in retirement savings. The good news is that for some funds, like a 401(k), your employer will usually match some of the money that you put in. For you, that's free money! Despite these benefits, over 50% of Gen-Y have not started saving for retirement. This is especially shocking given than the typical index stock allocations of an average 401k and IRA see a relative increase of 8% over time, which is larger than most individuals gain from personal investments. In fact, it is almost impossible to "beat the market" over time. Famous investor Donald Trump has been labeled as a success for gaining over $4 billion from what was originally an inherited $20 million. However, had Donald Trump invested those same dollars in an index fund like the S&P 500 or the NASDAQ, he would actually have more money than he has today. The point is that early investments can yield huge returns over time if placed strategically.

3. Diversify your assets

Buffet has demonstrated the value of spreading your wealth and the harm of putting all of your eggs in one basket. Much of Buffett's early wealth came from insurance (GEICO), media (The Washington Post, and oil (Exxon). Later on, Buffet had ownership in beverage companies (including Coca-Cola) and financial companies (including Citigroup Global Markets Holdings). His strategic investments have exemplified the power of investing not only vertically--but also horizontally. Investing across different industries enables you to avoid the risk of pinning all of your bets in one space. By diversifying your assets, you are betting on a greater portion of the market. Thus, your investment becomes based on the success of the economy as much as any individual niche. As you choose industries and companies in which to invest, consider real estate, gold and silver, securities, and rising markets. Buffett had a knack of being able to see an undervalued business or market and be able to predict its imminent growth. By doing proper research, investigation, and consultation, you can gain insight on the relative state and future potential of investment opportunities.

Published on: Dec 2, 2015
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