Wise Investment Sayings by Warren Buffett 3

Wise Investment Sayings by Warren Buffett 3

Well, although I did say this is a money-making blog and will be full of different ideas on how to become rich and different ways to make money, I am biased in favour of Warren Buffett's investment style and paradigm. That's why he's more prominent on my blog and I mention him quite often as a role model. To be fair, I've included long and varied research and ideas on technical analysis, and individual investors should just make up their own minds as to which school of thought they believe in or prefer. What is your investment style? What are your goals? How do you like to make your money, and what risk can you take? etc, etc. Nonetheless, even if individual investors do not follow his style nor like him, there can be some things to learn from his homespun wisdom, and also - quite funny and humorous quotes sometimes. Enjoy!

More quotes from Warren Buffett to follow:

If you don't know jewellery, know the jeweller.

If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes.

There seems to be some perverse human characteristic that likes to make easy things difficult.

One’s objective should be to get it right, get it quick, get it out, and get it over... your problem won’t improve with age.

In the insurance business, there is no statute of limitation on stupidity.

If a business does well, the stock eventually follows.

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.

The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.

We will only do with your money what we would do with our own.

(One of the reasons why I respect this great man - real and proven financial integrity and probity.)

Of one thing be certain: if a CEO is enthused about a particularly foolish acquisition, both his internal staff and his outside advisors will come up with whatever projections are needed to justify his stance. Only in fairy tales are emperors told that they are naked.

When asked how he became so successful in investing, Buffett answered: "we read hundreds and hundreds of annual reports every year."

I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that. “I’m paying $32 billion today for the Coca Cola Company because...” If you can’t answer that question, you shouldn’t buy it. If you can answer that question, and you do it a few times, you’ll make a lot of money.

You ought to be able to explain why you’re taking the job you’re taking, why you’re making the investment you’re making, or whatever it may be. And if it can’t stand applying pencil to paper, you’d better think it through some more. And if you can’t write an intelligent answer to those questions, don’t do it.

I really like my life. I've arranged my life so that I can do what I want.

Someone's sitting in the shade today because someone planted a tree a long time ago.

If options aren't a form of compensation, what are they?

If compensation isn't an expense, what is it?

And if expenses shouldn't go into the calculation of earnings, where in the world should they go?

First, many in Wall Street - a community in which quality control is not prized - will sell investors anything they will buy.

An irresistable footnote: in 1971, pension fund managers invested a record 122% of net funds available in equities - at full prices they couldn't buy enough of them. In 1974, after the bottom had fallen out, they committed a then record low of 21% to stocks.

When returns on capital are ordinary, an earn-more-by-putting-up-more record is no great managerial achievement. You can get the same result personally while operating from your rocking chair. Just quadruple the capital you commit to a savings account and you will quadruple your earnings. You would hardly expect hosannas for that particular accomplishment. Yet, retirement announcements regularly sing the praises of CEOs who have, say, quadrupled earnings of their widget company during their reign - with no one examining whether this gain was attributable simply to many years of retained earnings and the workings of compound interest.

Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway.

The Stock Market is designed to transfer money from the Active to the Patient.

Managers thinking about accounting issues should never forget one of Abraham Lincoln's favorite riddles:

'How many legs does a dog have if you call his tail a leg?' The answer: 'Four, because calling a tail a leg does not make it a leg'.

Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds... any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops.

Working with people who cause your stomach to churn seems much like marrying for money - probably a bad idea under any circumstances, but absolute madness if you are already rich.

One of the ironies of the stock market is the emphasis on activity. Brokers, using terms such as 'marketability' and 'liquidity," sing the praises of companies with high share turnover... but investors should understand that what is good for the croupier is not good for the customer. A hyperactive stock market is the pick pocket of enterprise.

The speed at which a business success is recognized, furthermore, is not that important as long as the company's intrinsic value is increasing at a satisfactory rate. In fact, delayed recognition can be an advantage: It may give us the chance to buy more of a good thing at a bargain price.

I am out of step with present conditions. When the game is no longer played your way, it is only human to say the new approach is all wrong, bound to lead to trouble, and so on. On one point, however, I am clear. I will not abandon a previous approach whose logic I understand ( although I find it difficult to apply ) even though it may mean foregoing large, and apparently easy, profits to embrace an approach which I don't fully understand, have not practiced successfully, and which possibly could lead to substantial permanent loss of capital.

I don't usually play bridge, but Buffett apparently does:

(On Bridge) It’s got to be the best intellectual exercise out there. You’re seeing through new situations every ten minutes…In the stock market you don’t base your decisions on what the market is doing, but on what you think is rational….Bridge is about weighing gain/loss ratios. You’re doing calculations all the time.

(On Bridge) The approach and strategies are very similar in that you gather all the information you can and then keep adding to that base of information as things develop. You do whatever the probabilities indicated based on the knowledge that you have at that time, but you are always willing to modify your behaviour or your approach as you get new information. In bridge, you behave in a way that gets the best from your partner. And in business, you behave in the way that gets the best from your managers and your employees.

(Sources: free and public online sources, Wikipedia, libraries)

Ideas on how to become rich!

Wise Investment Sayings by Warren Buffett 2

More wise investment sayings by Warren Buffett to help you in investment and money making:

Risk comes from not knowing what you're doing.

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.

The investor of today does not profit from yesterday's growth.

There seems to be some perverse human characteristic that likes to make easy things difficult.

When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.

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.

You only have to do a very few things right in your life so long as you don't do too many things wrong.

The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities -- that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future -- will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.

Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.

You only find out who is swimming naked when the tide goes out.

Can you really explain to a fish what it's like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value.

A story that was passed down from Ben Graham illustrates the lemminglike behavior of the crowd: "Let me tell you the story of the oil prospector who met St. Peter at the Pearly Gates. When told his occupation, St. Peter said, “Oh, I’m really sorry. You seem to meet all the tests to get into heaven. But we’ve got a terrible problem. See that pen over there? That’s where we keep the oil prospectors waiting to get into heaven. And it’s filled—we haven’t got room for even one more.” The oil prospector thought for a minute and said, “Would you mind if I just said four words to those folks?” “I can’t see any harm in that,” said St. Pete. So the old-timer cupped his hands and yelled out, “Oil discovered in hell!” Immediately, the oil prospectors wrenched the lock off the door of the pen and out they flew, flapping their wings as hard as they could for the lower regions. “You know, that’s a pretty good trick,” St. Pete said. “Move in. The place is yours. You’ve got plenty of room.” The old fellow scratched his head and said, “No. If you don’t mind, I think I’ll go along with the rest of ’em. There may be some truth to that rumor after all."

(Where he criticises technical analysis)

For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don't understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it's going up.

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.

We have tried occasionally to buy toads at bargain prices with results that have been chronicled in past reports. Clearly our kisses fell flat. We have done well with a couple of princes - but they were princes when purchased. At least our kisses didn't turn them into toads. And, finally, we have occasionally been quite successful in purchasing fractional interests in easily-identifiable princes at toad-like prices.

Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.

If you're an investor, you're looking on what the asset is going to do, if you're a speculator, you're commonly focusing on what the price of the object is going to do, and that's not our game.

I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out.

The important thing is to keep playing, to play against weak opponents and to play for big stakes.

There are all kinds of businesses that Charlie and I don't understand, but that doesn't cause us to stay up at night. It just means we go on to the next one, and that's what the individual investor should do.

In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.

Charlie and I decided long ago that in an investment lifetime it's too hard to make hundreds of smart decisions. That judgement became ever more compelling as Berkshire's capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart - and not too smart at that - only a very few times. Indeed, we'll now settle for one good idea a year.

The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.

(One of his best pieces of advice!)

I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.

We're more comfortable in that kind of business. It means we miss a lot of very big winners. But we wouldn't know how to pick them out anyway. It also means we have very few big losers - and that's quite helpful over time. We're perfectly willing to trade away a big payoff for a certain payoff.

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.

The most common cause of low prices is pessimism-some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.

Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.

Time is the enemy of the poor business and the friend of the great business. If you have a business that's earning 20%-25% on equity, time is your friend. But time is your enemy if your money is in a low return business.

Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising 'Take two aspirins'?'"

If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

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.

"The strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it."

Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing.

If you understood a business perfectly and the future of the business, you would need very little in the way of a margin of safety. So, the more vulnerable the business is, assuming you still want to invest in it, the larger margin of safety you'd need. If you're driving a truck across a bridge that says it holds 10,000 pounds and you've got a 9,800 pound vehicle, if the bridge is 6 inches above the crevice it covers, you may feel okay, but if it's over the Grand Canyon, you may feel you want a little larger margin of safety.

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.

You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else.

(collated from various public, library, and online sources)

Ideas on how to become rich!

Wise Investment Sayings by Warren Buffett 1

Wise Investment Sayings by Warren Buffett 1

Here are some wise investment sayings by billionaire Warren Buffett, the Chairman of Berkshire Hathaway and the so-called Sage of Omaha. He is currently the best in value investment in the world and operates according to an investment paradigm taught to him by Benjamin Graham. At the same time, this very humble man has a lot of home-spun wisdom and ideas that make him sound very old-fashioned and down-to-earth.

Here are some of my favourites:

Quotes and quips from Warren Buffett:

A public opinion poll is no substitute for thought.

The chains of habit are too light to be felt until they are too heavy to be broken.

I don't look to jump over 7-foot bars; I look around for 1-foot bars that I can step over.

Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.

I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years. (The idea of buying and holding)

Our favorite holding period is forever. (There, proof!)

If a business does well, the stock eventually follows. (Value investing, and fundamental analysis)

If past history was all there was to the game, the richest people would be librarians. (It's more than analysing the history of the company)

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.

It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.

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.

Price is what you pay. Value is what you get.

(I think this is one of the keys to his sayings)

Ideas on how to become rich - Warren Buffett is my hero :)