Warren Buffett is generally considered one of the best investors of our generation. Aug 30th was Warren Buffet’s 91st birthday. Warren Buffett has voiced his opinion on several topics over the decades in interviews, at the annual Berkshire Hathaway shareholder meetings, and investor letters. While we may not agree with everything he says, there are nine decades of wisdom buried in Warren Buffett’s quotes.
As a result of a long and thriving investment track record, investors often rely on his wisdom distilled into some of the best investing quotes.
Here are some of Warren Buffet’s most famous quotes on nine topics to celebrate nine decades of wisdom.
Warren Buffett Quotes About Money
Warren Buffet’s two rules of investing are one of his most famous quotes.
“Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.”
Do not take Buffett’s quotes at face value. The quote means that you should evaluate risk and not lose all your money.
Buffett has lost money in several investments throughout his career and talks about his failed investments openly. “I bought a company in the mid-’90s called Dexter Shoe and paid $400 million for it. And it went to zero. And I gave about $400 million worth of Berkshire stock, probably now worth $400 billion. But I’ve made lots of dumb decisions. That’s part of the game.”
In my four worst investments article, I mention how I lost over $100K in each of the four investments. But unless we take risks, we would never be able to land multi-bagger moonshot stocks.
Of course, make sure to avoid leverage as per the quote from Buffett, “We will reject interesting opportunities rather than over-leverage our balance sheet.”
In his 2002 annual letter to the shareholders, Buffett mentioned, “In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
Warren Buffett Quotes On Gold And Cash
Investors frequently quote Warren Buffet’s two rules of investing as the reason to hold gold or cash.
Warren Buffett is not a fan of holding cash or gold. I wholeheartedly agree with Warren Buffett that don’t keep your assets in cash besides a healthy emergency fund.
Here is a Warren Buffett quote on cash “Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. “
Just like every topic in personal finances, there are good and bad reasons to invest in gold.
Gold bugs were not enthusiastic with Warren Buffett’s gold quote. “Gold gets dug out of the ground in Africa… Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.“
Instead of hoarding cash, invest in income-producing assets based on your risk tolerance. All investments involve risk. You cannot avoid risk in life. By not investing your money, you transform short-term risk into the long-term risk of your money being depleted by inflation.
Risk is a part of God’s game, alike for men and nations,” says Warren Buffet.
Warren Buffett Quotes On Value Investing
Warren Buffett has praised The Intelligent Investor book by Ben Graham as “by far the best book on investing ever written.”
If you wonder what Warren Buffet’s investment philosophy is, Buffett follows the Ben Graham school of value investing. Naturally he has had many famous quotes about value investing.
“Price is what you pay. Value is what you get.”
In the early days of Berkshire Hathaway, Buffett would focus on buying beaten-down companies trading below a conservative assessment of their liquidation values. Warren Buffett named the strategy “cigar butt investing.”
Buffett explained the approach in his 1989 letter to Berkshire Hathaway shareholders: “If you buy a stock at a sufficiently low price, there will usually be some hiccup in the fortunes of the business that gives you a chance to unload at a decent profit even though the long-term performance of the business may be terrible. I call this the ‘cigar butt’ approach to investing. A cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the ‘bargain purchase’ will make that puff all profit.”
Warren Buffett’s ideas on investing has evolved due to the influence of Charlie Munger. The new paradigm of value investing is reflected in his purchase of Apple shares which now form a significant part of Berkshire Hathaway holdings. He has even expressed regret at not buying Amazon shares.
As a result of refining his value investing framework, Warren Buffett quotes on acquisitions is “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Warren Buffett is not the only value investor who has changed his mind about value investing. Bill Miller also started as an “old school value investor” betting on mean reversion in the 1980s. In the 1990s, he pivoted. First, Miller focused on companies with a higher return on capital. Then he started investing in technology and internet companies, including Amazon, Dell, and AOL.
Warren Buffett Quotes On Long Term Investing
Warren Buffett is ardent champion of buy-and-hold investing for the long term. Warren Buffett has had several quotes related to stock market investing for a long time.
“You can’t produce a baby in one month by getting nine women pregnant.”
In other words, if something takes time, you can’t rush it.
.Here are some of Buffett’s best quotes about why buying great stocks for the long run is the most intelligent way to go and how investors should approach their investment decisions.
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”
“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
However, like every famous Warren Buffett quote, please do not take it at face value. Instead, analyze the intent and apply it to your investment style. Buffett frequently analyses his holdings and sells the stock when the investment thesis is no longer valid.
The Warren Buffett quotes on long-term investing should be paired with his thoughts on selling. “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.”
One should note the difference between when a company’s investment thesis has changed to when a good company starts selling for a lower price, although nothing has changed in the business. Economic recessions are when people often panic and wonder, “should I sell my stocks now“? The last few recessions have shown that good assets with temporarily depressed prices do bounce back eventually.
In fact, during recessions, it is advisable to load up on significant assets selling for cheap. Warren Buffet’s insight in identifying and picking up great companies during a downturn has resulted in tremendous gains to his shareholders.
The legendary Warren Buffett greedy quote sums up his investment philosophy during recessions “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
In his annual letter to shareholders, Warren Buffett further elaborated on his greedy quote strategy “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.”
Warren Buffett Index Funds Quote
In addition to being a massive fan of long-term buy-and-hold investing, Warren Buffett is also a great advocate of index funds.
In a 2016 Berkshire Hathaway shareholder letter, Buffett said, “Over the years, I’ve often been asked for investment advice, and in the process of answering, I’ve learned a good deal about human behavior. My regular recommendation has been a low-cost S&P 500 fund.”
Investing in a low-cost index fund ensures that you do not need to spend time picking winners and losers. Fees are low, which means more money in your pocket. And since index funds hold thousands of companies, you are diversified across various sectors of the economy.
Buffett has instructed his trustee to invest 90% of his money into the S&P 500 for his wife after he dies. “I just think that the best thing to do is buy 90% in S&P 500 index fund.”
I am a massive fan of M1 Finance for index investing. M1 Finance has zero fees, low minimums and automated investment options. You can read my complete M1 Finance review, including the comparison with other platforms.
Warren Buffett Diversification Quote
Warren Buffett has famously said he is against diversification. “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”
Reading the quote without context might lead one to assume that Buffett doesn’t like index funds and instead favors picking individual stocks. However, all the above quotes related to index funds show that Buffett recommends index funds to individuals who are not professional investors.
Warren Buffett has said, “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.
It is hard to compete against professional investors. No matter how good I am at trading, I can never beat the legendary Jim Simons Medallion Fund In fact, Jim Simons has even outperformed even Warren Buffett by a wide margin.
None of us can achieve results similar to professional investors unless we put in significant time and effort.
Warren Buffett Quotes On Reading
Warren Buffett advocates the diversification benefits of index funds since it takes a lot of time to analyze and select companies to invest in. He is a massive fan of reading and spends a lot of time studying company financials. There are several Warren Buffett quotes related to reading.
“I just sit in my office and read all day.”
When asked how to get smarter, Buffett once held up stacks of paper and said, “Read 500 pages like this every week. That’s how knowledge builds up, like compound interest.”
It is not just Warren who is a fan of reading but also his business partner, Charlie Munger.
“You could hardly find a partnership in which two people settle on reading more hours of the day than in ours,”
I am a massive fan of reading and organizing my books based on best early retirement books, best beginner books on investing, and best real estate books for beginners.
Warren Buffett’s Compound Interest Quotes
Compound interest is such a powerful idea that Albert Einstein famously called it “the eighth wonder of the world.”
Over the 56 years managing investments at Berkshire Hathaway, Buffett has generated an annual average return of 20% for shareholders, twice the rate of return achieved by the S&P 500. Compounding the gains over a long period meant that a $100 investment in Berkshire Hathaway would have been worth an unbelievable $2.5 million today.
“My wealth has come from a combination of living in America, some lucky genes, and compound interest.”
Currently, at 91, he has a net worth of more than $100 billion. A large portion of that growth occurred after his 50th birthday on account of compounding gains.
Charlie Munger also is a massive fan of compounding.
“The first rule of compounding: Never interrupt it unnecessarily. The elementary mathematics of compound interest is one of the most important models there is on earth.”
Warren Buffett Quotes On Life
Nine decades of wisdom will involve several nuggets in life. Here are some of Warren Buffet’s quotes on life.
“Being given unconditional love is the greatest benefit you can ever get. The incredible thing about love is that you can’t get rid of it. If you try to give it away, you end up with twice as much, but if you try to hold onto it, it disappears. It is an extraordinary situation, where the people who just absolutely push it out, get it back tenfold.”
In terms of living your life and building a reputation, the Warren Buffett reputation quote is apt. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Warren Buffett has a great quote on integrity. “We look for three things when we hire people. We look for intelligence, we look for initiative or energy, and we look for integrity. And if they don’t have the latter, the first two will kill you, because if you’re going to get someone without integrity, you want them lazy and dumb.”
Warren Buffett is also a huge fan of improving human capital “Your best investment is yourself. There is nothing that compares to it.”
Warren Buffett also talks about habits “Chains of habit are too light to be felt until they are too heavy to be broken.” Practices are one of the critical methods on how to get stuff done when you don’t feel like it.
To further reinforce habits, there is also a Warren Buffett surround yourself quote “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.”
One of the best ways to ensure success is surrounding yourself with accountability partners.
Over the years, Warren Buffett has also observed individuals and opined on billionaires.
“Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.”
I have to assume that could be one of the reasons why Warren Buffett is not a fan of building generational wealth. In 2006, he joined the Giving Pledge and planned to donate most of his net worth to charity.
“I would say the most satisfying thing actually is watching my three children each pick up on their own interests and work many more hours per week than most people that have jobs at trying to intelligently give away that money in fields that they particularly care about.”
Final Thoughts On Warren Buffett Quotes
Based on the famous Warren Buffett quotes, it is safe to assume he recommends
- Investing in your human capital to increase your income. Conducting yourself with integrity and surrounding yourself with people better than you. Reading a lot.
- Have a diversified portfolio of income-generating assets.
- Don’t take unnecessary risks and lose all your money.
This article is originally on Financial Freedom Countdown.