Berkshire Hathaway’s chairman Warren Buffett, one of the most famed investors, still holds true to his forever motto that holding steady and being patient are key to successful investing.
The Oracle of Omaha is also known for investments that include safe dividend stocks — stocks that generate returns, which he then pours back into his investments — and the power of value investing.
Many investors revere his advice, which is not surprising. At 93, his fortune stands at $121 billion, according to the Bloomberg Billionaires Index. Here are some of his most valuable tips.
“The first rule of investment is don’t lose. The second rule of investment is don’t forget the first rule.”
Buffett famously said the above in a television interview. He went on to explain that you don’t need to be a genius in the investment business, but you do need what he deems a “stable” personality.
“Our favorite holding period is forever.”
Jay Zigmont — PhD, CFP and founder of Childfree Wealth — said he’s “with Buffett on that one.”
“There is an older study by Fidelity that found the best investors were dead,” said Zigmont. “The thing about dead investors is that they just leave their accounts as is and invest for the long-haul. Without knowing it, dead investors are following Buffett’s advice to hold stocks forever.”
As for the living, what we can learn is that the concept of simple, passive, long-term investing works, Zigmont added.
“Jack Bogle — Vanguard founder — said it this way: Don’t do something, stand there! Most people would be best off picking ETFs that reflect the market as a whole, buying them, and not selling them unless they need the money. Each time you buy/sell, you incur costs and may lose focus on long-term investing,” added Zigmont.
“Never bet against America.”
In his 2020 shareholder letter, Buffet wrote to never bet “against America.” He explained that while much of finance, media, government and tech is located in coastal areas, it’s easy to overlook the many miracles occurring in middle America.
“In its brief 232 years of existence, however, there has been no incubator for unleashing human potential like America. Despite some severe interruptions, our country’s economic progress has been breathtaking. Beyond that, we retain our constitutional aspiration of becoming ‘a more perfect union,'” he wrote. “Progress on that front has been slow, uneven and often discouraging. We have, however, moved forward and will continue to do so. Our unwavering conclusion: Never bet against America.”
“If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
This quote encapsulates Buffett’s long-term perspective, as one of his best-known attributes is patience and holding steady.
He wrote this in his 1996 letter to shareholders, stating: “Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher 5, 10 and 20 years from now. Over time, you will find only a few companies that meet these standards — so when you see one that qualifies, you should buy a meaningful amount of stock.”
He added that investors should also resist the temptation to stray from these guidelines.
“Be greedy when others are fearful and fearful when others are greedy.”
This quote has been reiterated countless times by Buffett, who initially wrote it in his 2004 letter to shareholders.
As he explained in the letter, “Over the last 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous.”
He said this stems from several issues: high costs, usually because investors traded excessively or spent far too much on investment management; portfolio decisions based on tips and fads rather than on thoughtful, quantified evaluation of businesses; and a start-and-stop approach to the market marked by untimely entries (after an advance has been long underway) and exits (after periods of stagnation or decline).
“Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful,” he wrote.
“Buy wonderful businesses at a fair price.”
Buffett explained in a speech that he’d been taught to “look around for things that are cheap” and buy on a quantitative basis. While he said he did this for years, he explained that this is not a way to make money. Hence, now, he would rather “buy a wonderful business at a fair price, than a fair business at a wonderful price.”
“Buy only stocks that you can understand.”
“I have an old-fashioned belief that I should only expect to make money in things that I understand,” Buffett once remarked. What Buffett means is that while you don’t need to understand the intricacies of what a product is or how it works, you have to understand what the economics of the business are likely to look like decades from now.
“Big opportunities in life have to be seized.”
He argued that one of the biggest mistakes he made, which ended up costing Berkshire a lot of money, was due to not seizing an opportunity that was right in front of him.
The biggest mistakes he said, by far, “are mistakes of omission and not commission. The things I knew enough to do, they were within my circle of competence, and I was sucking my thumb.”
“Omission is way bigger than commission. Big opportunities in life have to be seized.”
“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.”
According to Nathan Brunner, CEO at Salarship, Buffett’s quote can be distilled into a simple yet profound mantra for investors: “Invest in companies, not industries.”
“For example, there has been a huge hype around AI technologies recently. The mistake I see many investors make is that they want to invest in any company as long as it is AI-related,” said Brunner. “It is a really bad investment strategy because it doesn’t consider the nuances and disparities between individual companies within the AI sector.”
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