Some Lessons from the Investing Master

Investment Advice, Back to Blog

Have you heard of Warren Buffett?

If not, it’s time to introduce you to him. Known as the “Sage of Omaha” Buffett is now 91 years old and commands recognition as probably the world’s shrewdest investor. He has amassed a fortune of over $100 billion dollars, mainly through his role as chairman and CEO of the Omaha (Nebraska) headquartered conglomerate, Berkshire Hathaway.

People hang on his every word, his annual letter to shareholders of Berkshire Hathaway is highly valued and their annual shareholder’s meeting has grown into an enormous event, attracting crowds some years (before Covid) in excess of 40,000 people!

One of his great attributes is his willingness to share investing advice and knowledge, which is often delivered through memorable quotes that have stood the test of time. We’ve captured a few of them below, under three of his main themes that he refers to frequently.

Investing Advice: The importance of time

The theme of Time runs through many of Buffett’s best quotes. He said, “Someone’s sitting in the shade today because someone planted a tree a long time ago.” The lesson is that investing is like waiting for a tree to grow. Don’t expect quick results – it takes many years of careful nurturing and patience. The rewards will be evident after many years.

He also said, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” In this quote, Buffett explains that success for the average investor is achieved through long-term investing, as opposed to trying to achieve quick wins through short-term bets.

He also came out with the memorable quote that some things (investments) just cannot be rushed, when he said, “No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”

Investing Advice: You must understand risk

Warren Buffett places tremendous store in taking time out every day for reading and just thinking. He doesn’t believe in rash decisions, instead his decisions tend to be based on strong research and education. He said, “Risk comes from not knowing what you are doing.” Taking your time and taking wise, careful decisions reduces your investment risk.

When giving investment advice his Golden Rule is, “Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.” He is not advising that you invest in assets that never fall in value. Instead he is advocating a risk based portfolio that offers meaningful potential to increase in value over a reasonable timeframe. He avoids taking unnecessary risk such as investing in single or speculative assets that can lead to catastrophic losses. If you want to make money, you need to preserve your capital over any reasonable timeframe.

Investing Advice: Don’t let your own behaviours get in the way

Buffett is a real believer that our own behaviours greatly influence our investment outcomes. Time and again, we see novice investors getting greedy as market prices rise and buying in when stocks / property etc. are very expensive. Likewise after market crashes, we see uneducated, fearful investors sell up at a low price when this is the best time to be greedy and buy in. He captured this as, “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”

Despite his vast wealth, Warren Buffett is a simple man – he eats at McDonald’s for breakfast every day (and spends no more than $3.17 each time). He also still lives in the same house he bought for just $31,500 in Omaha, Nebraska in 1958. He has also pledged to give away 99% of his wealth during his lifetime. His take on this which is a lesson for us all is, “I’ll give my kids enough money so that they would feel they could do anything, but not so much that they could do nothing.”
There are lessons in here for all of us.

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