Investment lessons of a lifetime
When you learn, you must learn from
the best. And when it comes to investing, who better to learn from than legendary
investor Warren Buffet?
Widely regarded
as one of the most successful investors in the world, Warren Buffett is as
famous for his wit as he is for the investment skills that have put him among
the world’s most wealthy people. But what can you learn from the insights that
have made him so successful?
On investing when the market is
falling:
Buffett says, “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.”[1] One of his most famous quotes of all: “Be
fearful when others are greedy, and be greedy when others are fearful.”[2]
On value investing:
“It's far better
to buy a wonderful company at a fair price than a fair company at a wonderful
price” or, more succinctly, “Price is what you pay. Value is what you get.”[3]
Buffett’s advice
is to invest in the future of the business: “If a business does well, the stock
eventually follows.” He studies annual reports in detail, but warns that
“Managers and investors alike must understand that accounting numbers are the
beginning, not the end, of business valuation”[4]
and, with typical Buffett cynicism: “I try to buy stock in businesses that are
so wonderful that an idiot can run them. Because sooner or later, one will.”[5]
On timing the market:
Buffett is a long-term
investor. As he says of shares, “Our favourite holding period is forever.”[6] He freely admits that he has “…no idea
of market timing. It’s easier to tell what will happen than when it will happen,”[7] and
adds that “The fact that people will be full of greed, fear or folly is predictable.
(But) the sequence is not predictable.”[8] He also agrees it’s deceptive to judge
future performance by events of the past, pointing out that “The investor of
today does not profit from yesterday's growth."
These are not
just pithy quotations. Buffett has revisited and expanded these themes many
times. He attributes his wealth to sticking with the investment basics — value
investing in the shares of quality companies while making a long-term commitment,
and staying with the market through good and bad times rather than trying to
pick the market’s rising periods.
When it’s boiled
down, Buffett’s most valuable secret is no secret at all. Sticking with it is
the secret.
Want to learn
more about how to tailor your investments to suit your investment and risk
profile? Call us, today.
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