"The Best Investment for Retirement: Understanding What You're Doing." - Warren Buffett

"Only invest in assets you understand There are numerous assets you could invest in today that have the potential to make you money. You could buy stocks, bonds, ETFs, REITs, or dabble in alternative investments, like commodities and collectibles. But one thing Buffett insists on is only investing in assets you understand. And that's important advice to follow. In fact, Buffett has long recommended that everyday investors looking to build retirement wealth invest their money in an S&P 500 index fund."

"But Buffett says it's important to invest in companies you understand. That means: Understanding their business models and how they make money Understanding their strengths and weaknesses Understanding how they manage their balance sheets Understanding what threats exist In addition, it's also important to understand how each asset you choose for your portfolio fits into your investment strategy and lends to your goals."

"One big component of Buffett's strategy is to spend less than what you earn and invest the difference - ideally, for as many years as possible to allow your money to grow. But Buffett doesn't recommend throwing money into assets randomly and seeing where that takes you. He thinks there's one important rule to follow as you embark on your investing journey. Only invest in assets you understand"

Spend less than you earn and invest the difference for as many years as possible to benefit from long-term growth. Prefer broadly diversified vehicles like an S&P 500 index fund for retirement wealth if unwilling to actively manage holdings. When selecting individual stocks, choose only companies and assets that are thoroughly understood: their business models, revenue drivers, strengths and weaknesses, balance-sheet management, and external threats. Ensure each holding aligns with overall investment goals and strategy. Avoid buying assets based on hype or short-term trends; buy only when the company's prospects and portfolio role are clear.

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