3. When a stock price falls, buy, don't sell.
Buffett followed his own advice last year when he lost $2 billion in a matter of days after disappointing earnings reports drove down the prices of some of his biggest investments. But as he told CNBC, investors who jump ship when a stock price goes down deprive themselves of the chance to recover lost funds when the price goes back up.
Buffett has said he likes bear markets, and the more prices drop, the more he likes to buy. But in general, his advice is to buy dependable long-term stocks in companies whose industry and business model you thoroughly understand. "If you told me that the market was going to go down 500 points next week, I would have bought those same businesses and stocks yesterday," he explained. "I don't know how to tell what the market's going to do. I do know how to pick out reasonable businesses to own over a long period of time."
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