For those who have no idea what to invest in and when, then read investment tips from third richest man in the world as he suggests what must be done to make their money safe and profitable.

As usual, every year, Warren Buffet, the third richest man in the world, according to Forbes magazine, publishes a letter addressed to the shareholders of his investment company Berkshire Hathaway on his website.

The words of one of the most successful investors in history are full of insightful observations about the behavior of the markets and the economy, which can be quite useful not only for the company’s shareholders, but for anyone who is thinking of investing their money.

So here are the seven financial tips from Buffet’s letter. A complete guide for novice investors.

1. Bad times, more than a threat, are a business opportunity

Investors should not be frightened by adverse circumstances. “Politicians and experts have constantly complained about the big problems facing the United States. However, our citizens now live six times better than when I was born,” Buffet says.

When investors are absorbed in pessimism and uncertainty, they often tend to make mistakes. Rather than seeing the bad things, we must look for the opportunities that are on paper.

The key to success is being able to get rid of your short-term vision, full of despair and mistrust, and focus on the potential your investment may have in the long run. “Money will always flow into opportunities,” says the billionaire.

2. Fashionable businesses are not always the safest and most profitable

Warren Buffet says he’s ready to invest and has ‘his gun ready to fire now’ to make a big acquisition. But Buffet hasn’t pulled the trigger yet, suggesting he’s having trouble finding good deals.

“Buffet’s company currently has a cash reserve of $38 billion. This is the highest amount the company has ever had in its history,” Stifel Nicolas, an analyst with Meyer Shield, told The Wall Street Journal.

So if Buffet is handling his business with caution, it would be worthwhile for other investors to follow his example as well. This may be a further sign that market valuations are at too high a level.

Don’t be dazzled by fashion. The most popular investments can be very risky and the idea is not to buy stocks at ‘inflated’ prices.

3. Beware of excessive indebtedness

Many people have undoubtedly become rich on borrowed money, but excessive indebtedness has also been the way to ruin many.

The most serious problem is that living on the debt can become quite addictive. Very few people behave conservatively and after trying a loan, they are not tempted to be always in debt.

As the subprime crisis taught us, being over-indebted is very risky, because when we do well, profits are magnified and in difficult times, losses increase.

“As we learned in third grade – and some learned in 2008 – any series of positive numbers, no matter how impressive the numbers may be, evaporates when multiplied by zero. History has told us all too often that leverage produces zeros, even when used by fairly intelligent people,” says Buffet.

In business, debt can also be lethal. Heavily indebted companies often assume that their bonds can always be refinanced. While this assumption is generally valid, from time to time raising resources can become a difficult task, either because of specific company problems or a credit crunch.

In these cases, companies must assume their obligations and the only way to do this is with cash.

Buffet makes an analogy between credit and oxygen. “When it is abundant, its presence goes unnoticed. But when it’s missing, you can tell it’s missing. And a brief lack of credit can bring many companies to their knees. In September 2008, the disappearance of credit brought a country’s economy to its knees.

4. Liquidity, the key to business survival

Buffet emphasizes the need to have money available to face significant losses or to acquire companies with potential, especially in times of financial turbulence.

5. Invest other’s money as if it were your own

If people choose to give their money to a group of experts to invest for them, it is key that those who are going to manage their money act and feel those resources as their own. That is, they should grieve their losses and benefit from their profits.

Winston Churchil once said a phrase, which also works very well in the business world: “You shape your houses and then they shape you”.

Bureaucracies only create more bureaucracy. Buffet’s invitation is to follow the model of his company, Berkshire Hathaway, where operating costs are low and special emphasis is placed on a remuneration model that makes managers, officers and directors behave as owners. In Berkshire, “you and I (shareholders) are fortunate to have you as stewards”.

6. Coca Cola, the recommended action

Warren Buffet rarely makes predictions about an action. However, this time he ventures to talk about Coca Cola.

Since it purchased this share in 1995, the company’s dividends have increased. Buffet says, “In 2011, it is almost certain that he will receive $376 million from Coca Cola, which is $24 million more than he got last year. In ten years, I expect the $376 million to double.

At the end of this period, I wouldn’t be surprised if the billionaire would see Coca Cola’s annual earnings exceed 100% of what he paid for that investment. Corroborating once again his premise “time is the friend of big business”. The Buffet company holds 8.6% of Coca Cola’s shares.

7. Well Fargo will again give dividends to its shareholders

Dividends from the US bank will start to rise. The Federal Reserve, after the financial crisis, froze the dividend levels of most banks, whether they were weak or strong, for the next two years.

According to the billionaire, Wells Fargo currently enjoys economic strength and has been forced to keep its dividend payments artificially low.

At some point, probably soon, the Federal Reserve’s tightening will be lifted and Wells Fargo will be able to return to the dividend distribution policy that its owners deserve, writes Buffet. At that time, the bank’s dividends will increase by hundreds of millions of dollars a year, says Buffet, who has a 6.5% stake.