Seven Insightful Investing Quotes from Warren Buffett

Charles Munger

Imagine if you could sit and have a cup of coffee with one of the world’s richest men.

What if that rich man built his wealth the same way you are building yours – through investing?

What if that man were Warren Buffett?

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What would you ask? Would you try to learn something that would completely change your entire world of financial success?

Perhaps you feel like that would never happen. How could I ever sit and learn from Warren Buffett?

The truth is that you can!

No, maybe not in the traditional sense of an actual face-to-face coffee brunch. But you could get some insight from what he has to offer by looking at the things he’s already said to other people.

In fact, there are 7 insights he’s already shared from which we can glean a lot of understanding about wise investing.

Let’s explore each of them together.

1. “Risk comes from not knowing what you’re doing.”

People talk about how risky the stock market is. “It’s just too easy to lose money,” they say. Sure, it’s got risks involved. But so does depending on one employer who could go bankrupt or let you go at any time. So how do you manage risks in the stock market? Buffett suggests to know what you’re doing. Learn. The more you understand it, the better you will be at it.

2.“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

The best time to invest is several years ago. The second-best time is now. The sooner you get in the better. Don’t wait to buy stocks. Buy stocks and wait.

3. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

The wisdom here is that the focus should be more on the company itself than on the price of the stock. Not to say price is irrelevant. But Buffett is emphasizing that a good price on a stock of a bad company is still a bad idea. What you want to look for is a good company and then buy it when the stock is priced well.

4. “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

Here, Buffett is talking about the sunk-cost fallacy. This is the idea that you’ve already put money into something, so you should keep striving to make money with the initial investment even if doing so is both risky and requires more time and money. If you got into a bad deal, it’s better to count your loss and move on than to try to force your way into making something from nothing by dropping more resources into a lost cause.

5. “A public-opinion poll is no substitute for thought.”

Rather than jump on the latest headline with the newest fad, it’s better to think things through for yourself. Use your head and make wise choices based on your own analysis, not someone else’s.

6. “The only time to buy these is on a day with no ‘y’ in it.”

There are some stocks that are simply never good options. It doesn’t matter what the newspaper says. It doesn’t matter that your friend has stock in the company. There are some “deals” that just aren’t worth having, so avoid them.

7. “I always knew I was going to be rich. I don’t think I ever doubted it for a minute.”

These words are some of the wisest we can consider when it comes to investing. Buffett is dealing with mindset. You’ve got to know you are going to win. It may not be today. It may not happen the way you think it should. But deep down inside you’ve got to know you will win. That will make all the difference.

Wish these words of wisdom, you are certain to get ahead. Read think. Use them. Apply them. You won’t be disappointed with the results.

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About the Author

VintageValueinvesting
Ben Graham, the father of value investing, wasn’t born in this century. Nor was he born in the last century. Benjamin Graham – born Benjamin Grossbaum – was born in London, England in 1894. He published the value investing bible Security Analysis in 1934, which was followed by the value investing New Testament The Intelligent Investor in 1949. Warren Buffett, the value investing messiah and Graham’s most famous and successful disciple, was born in 1930 and attended Graham’s classes at Columbia in 1950-51. And the not-so-prodigal son Charlie Munger even has Warren beat by six years – he was born in 1924. I’m not trying to give a history lesson here, but I find these dates very interesting. Value investing is an old strategy. It’s been around for a long time, long before the Capital Asset Pricing Model, long before the Black-Scholes Model, long before CLO’s, long before the founders of today’s hottest high-tech IPOs were even born. And yet people have very short term memories. Once a bull market gets some legs in it, the quest to get “the most money as quickly as possible” causes prices to get bid up. Human nature kicks in and dollar signs start appearing in people’s eyes. New methodologies are touted and fundamental principles are left in the rear view mirror. “Today is always the dawning of a new age. Things are different than they were yesterday. The world is changing and we must adapt.” Yes, all very true statements but the new and “fool-proof” methods and strategies and overleveraging and excess risk-taking only work when the economic environmental conditions allow them to work. Using the latest “fool-proof” investment strategy is like running around a thunderstorm with a lightning rod in your hand: if you’re unharmed after a while then it might seem like you’ve developed a method to avoid getting struck by lightning – but sooner or later you will get hit. And yet value investors are for the most part immune to the thunder and lightning. This isn’t at all to say that value investors never lose money, go bust, or suffer during recessions. However, by sticking to fundamentals and avoiding excessive risk-taking (i.e. dumb decisions), the collective value investor class seems to have much fewer examples of the spectacular crash-and-burn cases that often are found with investors’ who employ different strategies. As a result, value investors have historically outperformed other types of investors over the long term. And there is plenty of empirical evidence to back this up. Check this and this and this and this out. In fact, since 1926 value stocks have outperformed growth stocks by an average of four percentage points annually, according to the authoritative index compiled by finance professors Eugene Fama of the University of Chicago and Kenneth French of Dartmouth College. So, the value investing philosophy has endured for over 80 years and is the most consistently successful strategy that can be applied. And while hot stocks, over-leveraged portfolios, and the newest complicated financial strategies will come and go, making many wishful investors rich very quick and poor even quicker, value investing will quietly continue to help its adherents fatten their wallets. It will always endure and will always remain classically in fashion. In other words, value investing is vintage. Which explains half of this website’s name. As for the value part? The intention of this site is to explain, discuss, ask, learn, teach, and debate those topics and questions that I’ve always been most interested in, and hopefully that you’re most curious about, too. This includes: What is value investing? Value investing strategies Stock picks Company reviews Basic financial concepts Investor profiles Investment ideas Current events Economics Behavioral finance And, ultimately, ways to become a better investor I want to note the importance of the way I use value here. It’s not the simplistic definition of “low P/E” stocks that some financial services lazily use to classify investors, which the word “value” has recently morphed into meaning. To me, value investing equates to the term “Intelligent Investing,” as described by Ben Graham. Intelligent investing involves analyzing a company’s fundamentals and can be characterized by an intense focus on a stock’s price, it’s intrinsic value, and the very important ratio between the two. This is value investing as the term was originally meant to be used decades ago, and is the only way it should be used today. So without much further ado, it’s my very good honor to meet you and you may call me…

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