Why do so many of us look for investment inspiration through Warren Buffett quotes?
A business prodigy, Buffett bought his first stock when he was just 11 years old. He then used savings to buy and install pinball machines in local shops when he was still a teenager.
Although he got rejected from Harvard (a decision that admissions officers now surely regret) he would go on to become one of the world’s most famous and wealthy value investors.
Today, he is the CEO of a former textile company called Berkshire Hathaway that has been transformed into the world’s highest-priced stock, valued at $316,700 a share in August, 2020.
Investors turn to his advice with such admiration that Buffett has earned the nickname the “Oracle of Omaha,” a reference to his home state of Nebraska.
Indeed, his sage perspectives on the market are so sought-after that “Warren Buffet quotes” is among the most Googled phrases in the online wealth management industry today.
Warren Buffett quotes are perhaps so desired because they are entertaining, succinct and easy to digest.
Funny and sharp, pithy and wise, Warren Buffett has become every bit the philosopher and high priest of the modern investment world.
However, so dense has the internet become with vast lists of Warren Buffett quotes, that, upon research, we discovered that it was necessary to craft a ‘top 20’ list that takes a more nuanced approach to long-term investing goals — the main pillar of the Buffett (and Sarwa) philosophy.
Here, we provide a list of our favorite Warren Buffett quotes to inspire your long-term investment goals.
[Want to build wealth with investment strategies used by Warren Buffett? Sarwa offers professional financial advisory that makes investing easy and affordable. Schedule a free call with a wealth advisor that can help put your investment goals on track.]
1. The most important of the Warren Buffett quotes: “Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.”
Otherwise known as Warren Buffett’s golden rule, this quote sets the foundation for his philosophy for investing. Essentially, what Buffett is saying is that capital preservation should be the main priority for any investor when deciding to place your money into the market.
In other words, stay rational.
However, the statement is actually inaccurate to Buffett’s actual track record of investing.
Buffett has made plenty of losing investments over his lifetime. Ironically, he even counts his investment into Berkshire Hathaway (once a New England textile company) as one of his biggest regrets. (This is because he, quite irrationally, started buying up shares in the company due to a feud with its then leadership.)
Perhaps the most important takeaway — even the “Oracle of Omaha” is human.
[One way to reduce the risk of losing money is diversification. For more on diversification, read, “Learning The Importance of Portfolio Diversification Can Prevent Huge Loss. Here’s Why.”]
2. “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
This quote forms a foundational pillar of Buffett’s long-term investment ethos. What he is saying here is that — in life as with investing — you have to think about the grand trajectory of things.
Overall, there is no better time to start thinking about that path than today. A tree takes time to grow, and so will most smart investments. Start early, be patient, and let your money grow.
3. “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
We love this quote because it offers perhaps the best insight into how Warren Buffett approaches active and passive investment debate.
Siding with passive investor legends like Jack Bogle, the founder of Vanguard Group, Buffett urges that we pick our investments wisely — and be ready to hold on to them for the long haul if we wish to see real rewards.
In this quote, he sets a clear divide with the emotional life of day traders, who prefer to scour markets looking for short-term aberrations instead of fundamental long-term growth.
Buffett preaches that the smart investor should also assess a stock by the company’s strengths and weaknesses, looking for long-term advantages it can win within its industry (that is, the fundamentals). This quote also reinforces the previous two quotes, underscoring a philosophy of patience and rational action.
4. “Our favorite holding period is forever.”
When Buffett explained that you should not hold a stock for 10 minutes if you don’t intend to hold it for 10 years, in actuality, we shouldn’t take him literally; he is not making 10 years the ideal or the cap.
Rather, the point is that you should not hold a stock in the short-term if you are not willing to hold it for the long-term. In fact, Buffett prefers to hold a stock “forever” — an emphatic way of saying to concentrate on the long term.
One implication of this is that Warren Buffett tries to find stocks that are worthy of being held for many years down the line. Instead of focusing on the short-term opportunities of a stock, he considers the fundamentals — the company’s ability to innovate in its market, establish an industry moat, and consistently boost its profitability.
This quote is especially relevant to passive investors.
Instead of losing sleep over the short-term fluctuations of an ETF, you should focus on its long-term potentials and its fundamentals — does it have good enough diversification, is the expense ratio low, how does Morning Star rate the ETF (five star or one star), is the ETF provider trustworthy, is it liquid enough, how well does it track its underlying index, etc.?
To be sure, the above quote does not mean that Buffett never sells a stock once he buys it.
Just last year, Buffett exited his position in 15 companies, including Pfizer, United Airlines, Costco Wholesale, and JPMorgan Chase. He also reduced his investment in 22 other companies.
Therefore, while his favourite holding period is “forever”, he does sell when he no longer believes in a company’s fundamentals.
The difference between Buffett and others who time the market is the reason for the sale — change in fundamentals (or to purchase another company with better fundamentals) rather than short-term volatility.
In Buffett’s own words, “All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.”
5. “Price is what you pay, value is what you get.”
This famous Buffett quote strikes at the heart of the “value investor” approach and reveals the secret of how Buffett made his fortune.
After Buffett was rejected by Harvard, he enrolled in an undergraduate degree at Columbia Business School. Which is where he studied under Benjamin Graham, today known as the “Dean of Wall Street.” Buffett was largely influenced by Graham’s magnum opus, The Intelligent Investor, which lays out the philosophy for value investing.
In essence, value investors are looking for deeply discounted share prices on the market. There is no better deal than a great company that is on sale for a low price, so the value investor mantra goes. To succeed at value investing, you should aspire to learn more about companies in the hope of discovering which are undervalued and, thus, great investment opportunities.
This other famous Buffett quote also nicely sums up value investing: “Whether we’re talking about stocks or socks, I like buying quality merchandise when it is marked down.”
6. “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”
One way to misinterpret Warren Buffett’s value investing is to assume that the only criteria for buying a stock is that it should be undervalued.
This quote seeks to correct that misunderstanding.
There are many companies with poor fundamentals that are undervalued. Being undervalued is not an all-telling sign that a stock is a good buy. Rather, the primary task of the investor is to consider if the stock has good fundamentals to begin with — if the company is wonderful.
Only when you believe that a company is wonderful should you consider if it’s undervalued or overvalued.
For an ETF, this means that the price and expense ratio are not the only important considerations. You need to consider the kind of diversification it offers, the trustworthiness of the ETF provider, the liquidity of the ETF (average trading volume), how well it tracks its index, and the rating Morning Star gives it.
Good pricing and a low expense ratio are important, but they are not the only factors you should consider.
7. “The most important quality for an investor is temperament, not intellect.”
A disciplined investor is a wealthy investor because they have learned that market fluctuations are normal and that patience pays off.
In this quote, Buffett touches on the psychological nerve of most investment failures. Humans are by nature irrational beings and are often tempted to make trades when they think the market is working against them. In contrast, it is the well-tempered investor that learns to not watch the market. This is the person that ultimately ends up reaping the most rewards over the long term.
Buffett extols that to build more wealth does not require you to be necessarily smarter than another investor, but rather that you become more disciplined with your reaction towards the irrationality of the market.
“You don’t need to be a rocket scientist,” goes a similar Buffett quote. “Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.”
8. “Risk comes from not knowing what you are doing.”
A little bit of research can reduce a lot of risk. Buffett is ever the pedantic investment professor, and in this quote he reminds us that we should study, study, study.
However, this advice can be often forgotten, especially after an investor has seen some success. A positive feedback loop can be misleading and indeed dangerous for investors.
Instead, as any good teacher prescribes, Buffett instructs that we do our homework.
Research the rules of investing, study holdings before deciding why to invest in ETFs, and learn the lessons of historical data. All of these are important factors that will improve your understanding of the market and reduce your risk when participating in it.
9. “Never invest in a business you cannot understand.”
What Buffett says here about businesses (individual stocks) is also true of every other investment asset. A primary reason why people lose money when they invest is that they invest in assets or businesses they don’t understand.
Most times, they do it based on the advice of a family, friend, or a complete stranger who has supposedly made millions from such assets or business. Sometimes, they do so because the particular asset or business is trendy and FOMO (fear of missing out — what Buffett calls greed) compels them to get in on the ride.
Blind faith in others that totally discounts the need to do personal research (as known as due diligence) is the bane of countless investors.
Before buying any asset (stock, bond, REIT, ETF, cryptocurrency, etc.), you should seek to understand how that asset works. Most importantly, you have to look beyond the return that they are promising and consider the risk as well.
People who promote trendy investment assets focus exclusively on the returns as a way to appeal to your greed. Your first task is to ignore the hype and try to understand the fundamentals of such an asset.
Only when you have a basic understanding of the asset — its returns and risks — should you attempt to invest in it.
Does this mean that you need to get a Masters in Finance? Far from it.
At Sarwa, we do our best to consistently provide you with good investing and financial planning resources through our blog. There, you will find the information you need to look beyond the hype and make sound investment choices.
10. “The most important investment you can make is in yourself.”
There are two things you should constantly invest in: your ability to make money and your ability to make money work for you.
Whatever you do, become better at it so you can command more value and increase your income.
But remember that while you can only work for a set amount of hours a day and for a certain number of years, money — because it is intangible — can work 24/7, forever.
Therefore, you should also invest in your financial education. Read Sarwa’s blog, attend our webinars, and consume content from other reliable financial resources (we often link to them in our articles).
11. “Never depend on a single income. Make an investment to create a second source.”
Here you have the pillar for why investment is so important. In life, we should never rely on a single source of income. Investing opens up a proven avenue to generating that all-important second income stream.
In this quote, Buffett also alludes to the importance of basic diversification. By establishing more than one income source, we essentially begin to diversify our own revenue streams.
Diversified, long-term investing is a recipe for success, as well as Sarwa’s approach to investing.
12. “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Few quotes provide as much insight into the mind of Warren Buffet as this one.
In this famous quote, Buffett reflects on an important fact: humans are naturally irrational. We can expect a large quantity of them in a group to do irrational things. This is why large market swings are often based on the whims of traders.
By rationally learning to work against this status quo, we learn that fighting the urge to follow the herd mentality into a stock will pay off. Meanwhile, running into a trend will often lead to disaster.
The best way to fight this greed and “become rich” is to think long term and begin investing in automated savings, retirement planning, or other investment schemes as soon as possible.
13. “No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”
One of Buffett’s most oft-quoted and colorful phrases, here the Oracle of Omaha is instructing us to understand that things cannot be rushed. There is no such thing as a successful ‘get rich quick’ scheme; investments — like babies — always take a certain amount of time to grow.
Indeed, by hastily jumping into an investment in the stock market you do more harm than good to your own hard-earned wealth.
The best bet: Always take a breath, learn to be patient, research and seek out expert financial guidance when needed.
14. “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.”
The stock market can be intimidating. This is especially true if you have already had an unfortunate acquaintance with the fear-greed cycle. It’s no surprise then that some still prefer to hold on to cash.
But as Buffett points out here, cash is the worst asset you can have. By not investing, you are keeping a depreciating asset that becomes devalued from inflation.
To fight inflation, we must discover ways to keep our wealth growing over time. The best way to do this today is to automate our investments. For those curious to learn more, this can start by building an investment portfolio from scratch after speaking with a financial advisor.
15. “We never want to count on the kindness of strangers in order to meet tomorrow’s obligations. When forced to choose, I will not trade even a night’s sleep for the chance of extra profits.”
While Warren Buffett believes that cash and cash equivalents are terrible as investments, he wants to keep some cash as a sort of protection — so that he can meet tomorrow’s obligations.
In other words, Buffett prefers to have enough cash to meet any ongoing requirements and avoid over-investing.
The lesson here for the individual investor is that you should have an emergency fund that protects you when emergencies arise.
Without an emergency fund, you might have to sell your investments to meet emergencies. Apart from the fact that you might be forced to sell those investments at a loss, you also miss the chance to keep growing that money through compound interest (an opportunity cost). Alternatively, you might be forced to depend on strangers to bail you out or incur debt at an expensive interest rate.
To avoid the above situations, it’s advisable you keep about three to six months’ worth of your living expenses in a savings or money market account as an emergency fund. After that, you can then invest all your money in the market.
With such security, you have less of a chance to lose sleep because of an unexpected emergency or count on the goodwill of other people (be they friends or strangers).
[To learn more about emergency funds and how to start one, read, “How To Start An Emergency Fund That Is Right For You: Smart Planning To Mitigate Financial Troubles”]
16. “Don’t pass up something that’s attractive today because you think you will find something better tomorrow.”
A bird at hand, they say, is worth two in the bush.
Passing over a good investment in expectation of a better investment in the future is a poor choice.
Not even the best investors can predict how the market will behave tomorrow. The good stock you pass over today might become the next big innovator and there might not be another like it.
Buffett’s advice is that once a stock satisfies the conditions that are important to you, there is little sense discarding it in the hope that a better one will come in the future.
This advice also applies to the question of when an investor should enter the market. Should you buy that stock or ETF now or wait for a more opportune time (maybe when it is cheaper)?
The reality is that when you invest for the long term, the time you spend in the market is more important than the time you enter the market. Research has shown that the market rises more than it falls and that the longer the time you spend in the market, the lesser your risk.
On the other hand, the more time you spend in the market, the more your money can earn compound returns.
Therefore, instead of waiting for a better time, invest your money in a lump sum and watch it grow over the long term.
[To learn more about why lump-sum investing is better than dollar-cost averaging and market timing, read, “Dollar-Cost Averaging vs Lump-Sum Investing: How Should You Invest?”]
17. “Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.”
It’s important to take investment advice, not with a grain of salt, but rather a whole bucket.
No investment expert or advisor knows the future. Forecasts about how the stock market will perform in the future are just that — mere forecasts.
Timing the market and making investment decisions purely based on market forecasts is not a good strategy.
Instead of trying to predict the market, Buffett prefers to focus on identifying companies with good fundamentals that the market is undervaluing. As long as the fundamentals don’t change, he will hold such stocks for the long term.
This combination of a focus on fundamentals and a commitment to the long-term will also save you from the emotional rollercoaster of reading every forecast by any investment “expert.”
18. “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.”
There is an inverse relationship between the fees that you pay an investment advisor and your net returns. The higher the fees, the lower your net returns.
Warren Buffett was not a big fan of mutual funds that charge high fees to manage investors’ money. His concern is even more understandable given that these mutual funds often fail to outperform the market — which is the main reason why they charge the high fees in the first place.
These low-cost passive funds are cheaper and they track an index rather than attempting to outperform it to no avail.
This is why Sarwa believes that ETFs — which are even cheaper, more liquid, and more transparent than index funds — are the best way to invest in the market.
[To learn more about ETFs, especially how they differ from mutual funds and index funds, read, “What is an ETF? Benefits of Investing with Low-Risk, Low-Cost, Accessible Funds”]
19. “The best chance to deploy capital is when things are going down.”
When the market is going down, everyone is fearful and instead of looking for new opportunities; they panic-sell their investments.
Buffett believes that market downturns are the best time to look for good companies that are undervalued, since the general market decline means such stocks are even more undervalued than if it were a bull market.
This is good advice even for passive investors.
Market downturns are a good time to invest more money in your diversified portfolio of ETFs. Why? You buy your ETFs cheaper, which means higher overall portfolio returns.
While you should invest anytime you have money to do so, without regard for the current condition in the market, market downturns are nonetheless a good opportunity to even double down on your investment rather than exiting the market out of fear.
[To see an example of how to apply this advice in a market downturn, read, “Should What’s Happening To The Bond Market Affect Your Portfolio?”]
20. “Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.”
Before receiving financial advice or trusting someone with your money, you should be sure they have the requisite knowledge, experience, and success with money. And it will be far better if you have a team of such people rather than a lone ranger or just a few individuals.
For example, Sarwa has a wealth advisory team with experience and expertise in finance, trading, consulting, business development, investor relations, and investing technologies, including former employees of Accenture, McKinsey and Co, PwC, and Vigilant Global.
We also have investment advisors and experts that include Dr. Jiro Kondo, an Assistant Professor of Finance at McGill University, and Dr. Zeina Zeidan, the chair of the Board Royal Financials. And there are many public figures who serve as Sarwa’s ambassadors, as well.
If we listen to Buffett, the smartest way to invest is to take action today and enjoy its benefits over time.
Schedule a free call with one of our wealth advisors to learn how Sarwa can help you begin your investment journey. Our wealth advisors are specialized in helping new investors create portfolios to match your unique financial goals, risk tolerance and time horizon.