10 Brilliant Quotes from Warren Buffett

This is based on an interesting article on the "..10 of the most common Buffett quotes, and some lessons we can learn from them." The article source is at the end of the blog. I've used the article and pulled the essentials from it and added some of my own comments. Note, this is not investment advise.

1. "Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."
It's a handy rule to follow, but even an expert such as Buffett lost billions in the global financial crisis and said he did some "dumb things" which he freely admits. (Read his letter to Shareholders in every Annual Report where he reviews his performance over the previous year). However, over the long term he has benefited by being conservative with his share investments and avoiding fads.

2. "It is better to hang out with people better than you ... you'll drift in that direction."
People should never be afraid to ask successful investors what they did and how they got there.  In many cases experts are willing to help out where possible and you should look for attributes or skills others have that can guide you.   You should avoid people who like to point out they are better than you.

3. "I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over."
That is, large gains often only come from taking huge risks where the chances of losing everything are magnified. (Risk and Return truism).   Too often investors go for a single big win rather than do the many small things that are already available such as having a strategy, reviewing regularly and diversifying.

4. "I buy on the assumption that they could close the market the next day and not reopen it for five years."   The quote truly tests your decision-making and your ability to think long term. Long term thinking all the time.

5. "Someone's sitting in the shade today because someone planted a tree a long time ago."
This is why taking a long-term view is important.  You should never forget why we enjoy some of today's luxuries - most of them are because someone else had a long-term vision and was prepared to invest for the future.

6. "Price is what you pay. Value is what you get."
The price of an investment can mask its true value because of factors such as emotion, market booms or busts, and even tax considerations.  Many people just see the price and give it priority and are often unable to perceive value because they don’t think or analyse why they are buying or do their homework so they cannot see past the price. If price is your only guide then there is no wider analysis.

7. "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
This is probably Buffett's most famous quote and is at the heart of his belief in avoiding the herd mentality.  Remember sharemarkets are often priced on emotional reaction and not logic. Buffett sticks to value.

8. "The investor of today does not profit from yesterday's growth."
Many investors like to jump on an investment that's doing well - that's why we have booms and busts - but they really should look to the future.  That’s not to say you shouldn’t still use historical trends, past performance and research data as important tools for making investment decisions.  But it is looking backwards to go forwards and should only be a part of your decision process.

9. "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."  Seems obvious doesn’t it.  But it is how Buffett identifies the value you should look at also.

10. "If a business does well, the stock eventually follows."
Buffett is famous for finding well performing companies that have strong management teams with a clear vision and then leaving the management to do what they have been doing well.

Source: Accessed 19/10/2012: http://www.couriermail.com.au/money/warren-buffetts-wise-words/story-e6freqpf-1226496064311 Dated 15 October 2012. 

Brett Lamond
19 October 2012
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