Warren Buffett’s Investment Quotes – The Business of Life
Warren Buffett, the “Oracle of Omaha”, is considered the greatest investing legend of all time. Starting from humble beginnings in Omaha, Nebraska, he has amassed a net worth of over $70,000,000,000 through long-term value investing.
He has given lots of guidance to younger investors, and has lots of quotes to go with it. When Buffett talks, people listen. Closely.
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
Start early, and have a long-time horizon. Wealth does not come quick, it is a long-term process that requires patience and temperament.
“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”
If a company has a competitive advantage over its peers, it is typically a better investment than a company with no advantage in a good industry.
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
Don’t be afraid to invest a large percentage into companies that you know will be successful. Little invested means little reward.
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
A wonderful company will grow, while a fair company may not. Buying at a fair price leaves room to grow.
“Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
Buy companies when they are undervalued, do not rush in.
“You can’t produce a baby in one month by getting nine women pregnant.”
Patience is key when investing in the stock market. It doesn’t matter how many moves you make, time is the key factor in wealth-building.
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
When people are scared of Mr. Market and prices are cheap, it is the time to look for opportunity. When people are praising the market for all of the positive gains, it is time to begin fearing.
“Widespread fear is your friend as an investor because it serves up bargain purchases.”
Piggybacking from the last quote, when other investors fear, it typically brings up good deals to buy.
“Chains of habit are too light to be felt until they are too heavy to be broken.”
Bad habits often lead to permanent failure. Focus on breaking bad habits before you are unable to.
“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be a more productive than energy devoted to patching leaks.”
If you are invested in something that will more than likely fail, cut your losses and get out. Much like Warren himself did recently with the airline stocks.
“Beware of geeks bearing formulas.”
There are many “gurus” out there, claiming that they can lead you to riches. Do not follow them, only follow what you know to be true.
“Never invest in a business you cannot understand.”
It is important to understand what you are getting into. Warren Buffett never understood technology companies, so he avoided them. He missed a lot of potential opportunities, but he also avoided potential disaster. For every Apple and Amazon, there were over a thousand Blockbusters.
“The most important investment you can make is in yourself.”
Buffett reads all the time. Most of the wealthy learned what they know now through continuous reading and learning. Don’t jump in and throw all of your money in the market without first understand what to do.
“One can best prepare themselves for the economic future by investing in your own education. If you study hard and learn at a young age, you will be in the best circumstances to secure your future.”
Don’t put off your education until you’re older. Learn now, and focus on your financial education.
“Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”
If you don’t have time for 500 pages a day, read less. Just make sure you incorporate reading into your day, because most of what you learn about investing is gained from books.
“Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.”
Trading is a form of speculation, not investing. It is a risky investment that nobody with a long-term horizon would even think about.
“The stock market is designed to transfer money from the active to the patient.”
Day trading looks like an extremely attractive way to get rich. But for every person that succeeds with it, many fail. Active investors consistently lose, while the passive investors win overtime.
“We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
Short-term market forecasts can cause investors to panic sell before they make much of a profit, and should be avoided altogether.
“Risk comes from not knowing what you’re doing.”
An investment might be riskier for one person than it is for another. If one person makes an investment because they were told to, it is a risky investment. If someone makes the same investment due to their own research and reasoning, it is not as risky of an investment.
“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start.”
Oftentimes people have thought that the American economy was going to fail, and the stock market was a death sentence. Time and time again, America has proven those people wrong and Mr. Market has continued to climb.
“Price is what you pay. Value is what you get.”
Just because the price is down doesn’t mean the value of the company has changed, it just simply means that investors aren’t as confident in the stock anymore.
“I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business.”
Thinking and reflecting is essential in reaching your goals. Moving forward without a plan is like being led by a sheep against an army of lions. You are sure to be slaughtered.
“If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on.”
Charlie Munger oftentimes puts companies into the “too hard” category. If he doesn’t understand what the assets are worth, he doesn’t waste his time with it. Warren Buffett does the same.
“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
If you buy in when everyone tells you to, you made a mistake, because you are already too late to the game.
“Speculation is most dangerous when it looks easiest.”
When speculation is easy, most people will end up losing.
“Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”
There is always opportunity in the stock market. Don’t be afraid to pass up on a potential opportunity if you aren’t sure if it will work out or not.
“Don’t get caught up with what other people are doing. Being a contrarian isn’t the key but being a crowd follower isn’t either. You need to detach yourself emotionally.”
Other people are wrong most of the time. Listen to yourself, and don’t get caught up in the hogwash on Wall Street.
“There is nothing wrong with a ‘know nothing’ investor who realizes it. The problem is when you are a ‘know nothing’ investor but you think you know something.”
If you realize that you know nothing, you are far more likely to limit your boundaries versus someone that does not realize that they known nothing, and loses everything.
“We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it.
Diversification does not decrease risk, if you don’t put as much effort into the research as you would less investments.
“Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”
If you know what you are doing, why would you invest in a large amount of companies? There aren’t 50 companies that would meet the same level of confidence as your top 5, so why would you put money into the other 45?
“You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”
Warren Buffett’s circle of competence does not extend into tech companies, which is why he avoids them. He is extremely competent in insurance companies and banks, which is why they make up the majority of Berkshire Hathaway’s portfolio.
“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”
Ignore the crowd, and focus on your own reasoning.
“It’s better to have a partial interest in the Hope diamond than to own all of a rhinestone.”
It is better to own part of an amazing company, rather than the entirety of a mediocre company.
“Buy companies with strong histories of profitability and with a dominant business franchise.”
Buy businesses that have a competitive advantage, and show a history of good management and profitability. These companies will most likely grow over the long-term.
“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”
It doesn’t matter how smart you are in the game of investing, it matters how well you can control your emotions.
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.”
Similar to the last quote, intelligence has nothing to do with investing. Patience and temperament are what matters.
“The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch.”
Don’t buy into the hype. Buy into a great company at a great price. You might have to wait for a bit, but the time will come.
“The most important thing to do if you find yourself in a hole is to stop digging.”
Much like gambling, people often throw money into the stock market, and then get themselves into an even worse situation once they start losing. They either panic sell, or throw more money into it hoping it will rise again.
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.”
These “gurus” you see all the time are typically not as rich as you think they are. Listen to your reasoning, not theirs.
“Only when the tide goes out do you discover who’s been swimming naked.”
Anyone looks smart in a bull market. Charlie Munger and Warren Buffett focus more on preparing for a bear market, rather than capitalizing gains in a bull market.
“If returns are going to be 7 or 8 percent and you’re paying 1 percent for fees, that makes an enormous difference in how much money you’re going to have in retirement.”
Losing 1 percent over a period of 20 to 30 years can mean hundreds of thousands of dollars lost.
“The best thing that happens to us is when a great company gets into temporary trouble…We want to buy them when they’re on the operating table.”
Many companies get into temporary trouble and go on-sale. This is when value investors like Warren Buffett and Ben Graham load up on shares.
“The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Cash is going to become worth less over time. But good businesses are going to become worth more over time.”
Cash is a depreciating asset, and to keep nothing but cash is to lose money.
“The best chance to deploy capital is when things are going down.“
When prices go down, buy in. When prices go up, sell out.
“If you like spending six to eight hours per week working on investments, do it. If you don’t, then dollar-cost average into index funds.”
Index funds are a great investment for someone that doesn’t want to become knowledgeable of their investments. They yield lower returns than performing your own investments, but higher returns than going in blind.
“If you buy things you do not need, soon you will have to sell things you need.”
You will never be wealthy buying things you don’t need. Cut down on expenses, and you will have more money for assets that will pay you over the long-term.
“The difference between successful people and really successful people is that really successful people say no to almost everything.”
Don’t jump in on every wave of hype that rolls your way. If you aren’t knowledgeable on what will happen, wait for an opportunity where you are.
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
Buy companies that will last a long time, and companies that will consistently grow.
“Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.”
When you buy a house, you want to make sure that you know everything about it, right? Do the same with your investments. Memorize every nook and cranny of the company before you put out your bucket.
“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”
When you hang around people worse than you, they will drag you down. Hang out with people better than you, and they will bring you up.
“Among the various propositions offered to you, if you invested in a very low cost index fund — where you don’t put the money in at one time, but average in over 10 years — you’ll do better than 90% of people who start investing at the same time.”
Most people lose in the stock market. People that invest in an index fund will typically beat most people.
“Time is the friend of the wonderful company, the enemy of the mediocre.”
Impatience leads to mediocre, even bad, results. Staying in a good company for a long period of time will lead to great results.