92 Investing Lessons From Warren Buffett

August 31, 2022

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92 Investing Lessons From Warren Buffett

Courtesy of ValueWalk, article by Dividend Growth Investor

The super-investor from Omaha has achieved quite the investment record at Buffett Partnership and Berkshire Hathaway. He needs no introduction.

Investing Lessons From Warren Buffett

I compiled a list with 92 investing lessons I learned from Warren Buffett:

“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1”
“Remember that the stock market is a manic depressive.”
“The most important thing to do if you find yourself in a hole is to stop digging.”
“Price is what you pay. Value is what you get.”
“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.”
“Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”
“For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.”
“Risk comes from not knowing what you are doing.”
“Never invest in a business you cannot understand.”
“If returns are going to be 7 or 8 percent and you’re paying 1 percent for fees, that makes an enormous difference in how much money you’re going to have in retirement.”
“In the business world, the rearview mirror is always clearer than the windshield.”
“Time is the friend of the wonderful company, the enemy of the mediocre.”
“The three most important words in investing are margin of safety.”
“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”
“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.”
“On the margin of safety, which means, don’t try and drive a 9,800-pound truck over a bridge that says it’s, you know, capacity: 10,000 pounds. But go down the road a little bit and find one that says, capacity: 15,000 pounds.”
“If a business does well, the stock eventually follows.”
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
“For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.”
All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies
I never attempt to make money on the stock market. I buy on the assumption that they’d close the market the next day and not reopen it for 10 years
“It is a terrible mistake for investors with long-term horizons — among them pension funds, college endowments, and savings-minded individuals — to measure their investment ‘risk’ by their portfolio’s ratio of bonds to stocks.”
Successful investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in 1 month by getting nine women pregnant
The stock market is designed to transfer money from the active to the patient
“Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.”
“If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”
“Our favorite holding period is forever.”
“An investor should act as though he had a lifetime decision card with just twenty punches on it.”
“Do not take yearly results too seriously. Instead, focus on four or five-year averages.”
“Time is the friend of the wonderful company, the enemy of the mediocre.”
“Why not invest your assets in the companies you really like? As Mae West said, ‘Too much of a good thing can be wonderful.’”
“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”
“There seems to be some perverse human characteristic that likes to make easy things difficult.”
“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”
“Success in investing doesn’t correlate with IQ … what you need is the temperament to control the urges that get other people into trouble in investing.”
“The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch.”
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.”
“What counts for most people in investing vs saving is not how much they know, but rather how realistically they define what they don’t know.”
“There is nothing wrong with a ‘know nothing’ investor who realizes it. The problem is when you are a ‘know nothing’ investor but you think you know something.”
“Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.”
“Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.”
“It’s better to have a partial interest in the Hope diamond than to own all of a rhinestone.”
You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital
Diversification is protection against ignorance. It makes little sense if you know what you are doing
“Wide diversification is only required when investors do not understand what they are doing.”
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start.”
“American business — and consequently a basket of stocks — is virtually certain to be worth far more in the years ahead.”
“Widespread fear is your friend as an investor because it serves up bargain purchases.”
“Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
“The best thing that happens to us is when a great company gets into temporary trouble…We want to buy them when they’re on the operating table.”
“Speculation is most dangerous when it looks easiest.”
“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
“Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”
Most common cause of low prices is pessimism; sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not bc we like pessimism but bc we like the prices it produces. It’s optimism that’s the enemy of the rational buyer
“After 25 years of buying and supervising a great variety of businesses, Charlie [Munger] and I have not learned how to solve difficult business problems. What we have learned is to avoid them.”
“Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game.”
“If past history was all that is needed to play the game of money, the richest people would be librarians.”
“You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.
“The investor of today does not profit from yesterday’s growth.”
“What we learn from history is that people don’t learn from history.”
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
“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.”
“Only when the tide goes out do you discover who’s been swimming naked.”
“Predicting rain doesn’t count, building the ark does”
“This does not bother Charlie [Munger] and me. Indeed, we enjoy such price declines if we have funds available to increase our positions”
“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.”
“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.”
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
“Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless.”
“If you get to my age in life and nobody thinks well of you, I don’t care how big your bank account is, your life is a disaster.”
“I always knew I was going to be rich. I don’t think I ever doubted it for a minute.”
“Basically, when you get to my age, you’ll really measure your success in life by how many of the people you want to have love you actually do love you.”
“Honesty is a very expensive gift. Don’t expect it from cheap people.”
“You only have to do a very few things right in your life so long as you don’t do too many things wrong.”
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.”
“When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients.”
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
“If you’re in the luckiest 1% of humanity, you owe it to the rest of humanity to think about the other 99%.”
“The difference between successful people and really successful people is that really successful people say no to almost everything.”
“You’ve gotta keep control of your time, and you can’t unless you say no. You can’t let people set your agenda in life.”
“In the world of business, the people who are most successful are those who are doing what they love.”
“It is not necessary to do extraordinary things to get extraordinary results.”
“Tell me who your heroes are and I’ll tell you who you’ll turn out to be.”
“The best thing I did was to choose the right heroes.”
“Chains of habit are too light to be felt until they are too heavy to be broken.”
“The most important investment you can make is in yourself.”
“Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”
“I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business.”
“Imagine that you had a car and that was the only car you’d have for your entire lifetime. Of course, you’d care for it well, changing the oil more frequently than necessary, driving carefully, etc. Now, consider that you only have one mind and one body.”Prepare them for life, care for them. You can enhance your mind over time. A person’s main asset is themselves, so preserve and enhance yourself.”
“Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a fly epidemic….and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”
“I call investing the greatest business in the world … because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There’s no penalty except opportunity lost.. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it.”