With a net worth of $84 billion, Warren Buffett is one of the greatest investors of our time. Just as how we like to evaluate the management of a company through its words and actions, Buffett’s quotes also reveal a great deal about his character, beliefs, and investment philosophy. And I believe we, as investors, can draw huge inspiration from the wisdom and experienced offered by his timeless quotes.
So here are, in my opinion, eight timeless quotes from Warren Buffett that everyone can learn something important from:
1. ‘Be fearful when others are greedy, and be greedy when others are fearful.’
Greed and fear – the two emotions that are the bane of every investor. Remember Sunshine Empire, Gold Guarantee and Genneva Gold? These Ponzi schemes have conned thousands of people out millions of dollars and you wonder why do people continue to fall for such schemes?
The reason is simple: Greed. People see early investors walking away with large profits and they rush to jump in because they don’t want to “miss the boat”. But more often than not, when everyone starts jumping onboard to try making money out of something, the more prudent you should be in investing your money.
Likewise, history has proven that an economic crisis is the best time to invest in the stock market — most people know this! Then again, fear triumphs over logic in most people. When prices fall, investors dump their shares to “cut their losses”. Are you able to override this fear? Because if you do, you will have the greatest opportunity to buy wonderful companies at huge discounts.
2. ‘Someone is sitting in the shade today because someone planted a tree a long time ago.’
The earlier you start, the better off you will be in the future. Warren Buffett planted his tree a long time ago. He bought his first stock at age 11 and he regrets that he didn’t start earlier! Berkshire Hathaway’s investment in Freddie Mac in 1990 was worth almost $4 billion by the time he sold it in 2000. I could go on about his investments in Coca-Cola in the late 1980s, American Express in the mid-1960s, etc. But I won’t. You get the point.
Imagine if you had saved a large sum of money whenever opportunities come calling? How will your life be different today? The SARS epidemic in 2003, the financial crisis in 2008, the euro debt crisis in 2010 — all of them presented a chance for you to possibly double or triple your wealth. Opportunities come and go… and if you missed out, more will come still, but you better be ready then! It is always good to start early… because you can never buy back time.
3. ‘Time is the friend of a wonderful company.’
If you are going to invest, invest in a wonderful company with a great business! A wonderful company will continue to grow as time passes. As it becomes bigger and more profitable, the more likely it is to garner the attention of investors and the media. The more attention and coverage it gets, the more demand there is for its stock — driving prices higher. Think of Apple, Amazon or Visa. Over the years, these companies have grown from strength to strength, becoming more profitable as they gobble up more market share in their respective industries.
A great example is Malaysian-listed company Hartalega, the world’s largest nitrile glove producer. Its stock IPOed in 2008 at RM0.50 per share, it is now worth around RM5.30 – a return of 960%.
4. ‘Risk comes from not knowing what you are doing.’
Granted, everything has risk. Even going outside means you have 1 in 1.9 million chance of being struck by lightning! But because we know it’s highly unlikely it’ll happen, we get out of our houses and head to work every day.
But would you dare ride in your friend’s car if he never passed his driver’s license? Or would you go scuba diving without proper training and certification? No you wouldn’t because you know it’s risky. But that risk is drastically reduced when you are trained and know what to do. Suddenly, driving and diving don’t seem so risky after all.
Likewise, when investing in the stock market, it is crucial that you know what you are investing your money into. Have you examined the company’s business model, its financials and valuation? What is your time horizon and exit plan for an investment? Just as you wouldn’t hop on a friend’s ride if he didn’t know how to drive a car, never go into the market blindly just because someone out there says that there’s an opportunity you need to jump into now. It’s your money, your responsibility, and your reward – so do your homework.
5. ‘Price is what you pay, value is what you get.’
This is one of the most famous quotes from Warren Buffett but what does it really mean? In layman terms, it is simply about getting more than your money’s worth — and it can be applied to almost anything in the world.
If an economy class ticket to Europe costs $1,200, would you pay an extra $300 to upgrade to business class so you can have that extra leg room, priority check-in, better choice of food, free flow champagne and that extra touch of exclusivity? I don’t know about you, but I would! The value of that experience worth is so much more than its price — the extra $300.
Likewise, in the world of investing, if a great company — that has a business model that generates high cash flow, zero debt, pays dividends consistently and is on course to grow 15% annually for the next five years — is selling at a 25% discount to its value, would you snap it up? I would and so should you.
6. ‘The most important investment you can make is in yourself.’
Try to unlearn the English language… you can’t. This is because the skills you learn stay with you forever. Knowledge, wisdom, personal growth are things that can never be taken from you.
Want to invest better and grow your wealth? Pick up a book or join course and start devouring the knowledge between those covers.
Want a pay raise or to become more relevant in your industry? Upgrade your skills, network, and work hard because your accomplishments stay with you forever.
You are your own biggest asset and you alone determine how you want to lead your life and the brightness of your future.
7. ‘I don’t look to jump over seven-foot bars, I look for one-foot bars I can step over.’
Warren Buffett is a simple man when it comes to his investments. He doesn’t go chasing the next hot stock or the next big thing hoping to strike it rich; he simply invests in familiar companies he fully understands.
How does Coca-Cola make its money? It sells soda and beverages to consumers around the world (to the tune of billions!). Nothing fancy schmancy about that. We’ve all drank a can of Coke in our lives.
Buffett invested in the train company, Burlington Northern Sante Fe, in 2008. What does it do? It gets people and goods from point A to point B. Again, a simple business that anyone can grasp.
The point is Buffett doesn’t overcomplicate things when it comes to his money and investments; he sticks to the businesses he knows will give him a high probability of success (the 1-foot bars) and ignores the rest.
So ask yourself: What are the companies you’re already familiar with? And start from there. Have a caffeine addiction? Have a look at Starbucks. Where do you shop? CapitaLand Mall Trust might be worth exploring. Love curry puffs? Old Chang Kee is listed.
Likewise, in life, set short attainable goals towards your bigger vision. If you want to make reading a habit but finds it hard… Why not allocate just 30 minutes a day to reading instead of trying to read a whole book in one day. Once you get used to the 30-minute time frame, you can increase it to an hour, and so on.
So… where are your one-foot bars?
8. ‘Predicting rain doesn’t count, building the ark does.’
Less talk, more action! We can dream about the impossible, make all the plans we want and talk all about the possibilities, but nothing happens until you take the first step. I’m sure you’ve heard of the phrase: ‘if only…’ (‘早知道…’).
A few years ago, one of my friends claimed that Facebook was his idea and he went on to talk about how rich he would be if he had implemented that idea. Well, if he actually did something… maybe.
We can watch the news and wait with bated breath when the next crisis will happen. But until we start saving and setting aside a sum of money to capitalize on that opportunity, we’ll never benefit even if the crash comes true.
Truth is, we all want a better life, be wealthier and happier. But if all we ever do is to talk until the cows come home, nothing will change until you start something going. So get going today if you already haven’t!
Are you a fan of Buffett? Here are 7 things we learned from reading Warren Buffett’s annual letter to Berkshire shareholders