Warren Buffett, the legendary “Oracle of Omaha,” is one of the wealthiest people in the world, having amassed a fortune of more than $70 billion since the 1960s.

Many people take investment lessons a from Buffett, and base stock-picking tips on his homespun attitude. Buffett is way too big to be investing in penny stocks — he only gets involved in mega-cap giants — but that doesn’t mean his methods and approach doesn’t hold lessons for penny stock investors and traders.

Here are a few Buffett staples that penny-stock investors would be wise to keep in mind:

What are Warren Buffet Stock Tips?

  • Don’t borrow too much and don’t take unnecessary risk
  • Be optimistic with bear markets
  • Never lose money, or at least limit your losses

Don’t Borrow Too Much

Buffett is not keen on borrowing or leveraging money. If you’re borrowing capital in order to trade, you need to make up the interest on the borrowed capital, which could lead you to take unnecessary risks doing so. Although leverage can be a good thing at times, it could cause you to lose more than you expected to lose.

For example, let’s assume you short a stock on a margin account, you could lose a whole lot more than you expected, since theoretically, a stock’s price could run higher, and you’re borrowing securities from your brokerage firm in order to sell short a stock. Therefore, you would be taking on a lot of risk, if you’re just starting out, you would want to shy away from taking on too much leverage.

Try to Be Optimistic

Let’s face it, there are many things to be pessimistic about when the market is selling off. You might think the sky is falling if you’re in stocks when they’re experiencing a bear market.

Buffett, by comparison, takes an optimistic approach when it comes to bear markets. Rather than being afraid of them, he’s optimistic and excited about them, as they mean he can potentially get stocks on the cheap.

Limit Your Losses

Buffett has said he has two rules: 1) Never lose money, and 2) Never forget rule number one.

It’s pretty hard to avoid losses when you’re trading, particularly in penny stocks. But you can take steps to minimize your losses. You can ask yourself “what would Warren Buffet penny stocks be?” and try to end each day without losses.

How to Find Penny Stocks

Always look long term and try to stay in the game for as long as possible. In other words, don’t let one position potentially wipe out your entire trading account. You should always focus on limiting losses, even if that means getting out and seeing the stock reverse. This balances out your optimism for the future, because you are aware of the risks along the way and living to invest another day.

Final Thoughts

These lessons aren’t only for those who follow a similar strategy to that of Buffett’s. They’re words of wisdom that nearly any market participant can potentially benefit from when they’re trading.


Jason Bond runs JasonBondTraining.com and is a swing trader of small-cap stocks.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

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