Born the son of a US congressman, international investment mogul Warren Buffett was always interested in achieving success. Reports claim he had an entrepreneurial spirit from early in childhood, when he would deliver papers on his bicycle for pocket money.
Now, according to Investopedia, Buffett’s fortune amounts to around $116 billion, making him the sixth richest person in the world at the age of 91.
Buffett’s investing prowess has seen him through several economic crises, including the 2008 financial crash and the Covid-19 pandemic. Nobody’s invincible, but Warren Buffett certainly has some wisdom to pass down to anyone who wants to grow their wealth through investing.
Especially during times of volatility, such as the downturns markets have experienced in the first months of 2022, it could be constructive to look to the ultimate investing guru for guidance.
Read on for five inspiring Warren Buffett quotes that can teach you about investing.
1. “Rule number 1: never lose money. Rule number 2: never forget rule number 1”
It’s a well-established rule among investors that you should never invest more than you can stand to lose. But for Buffett, it’s important to aim even higher: you should always aim not to lose money at all.
While even Buffett will have experienced losses throughout his long career, this inspiring quote could teach you to be strategic when investing.
Often, DIY investors take a scatter-gun approach to investing online, rather than consulting an expert who can help steer them towards a better-informed path.
So, whether you’re beginning or in the middle of your investment journey, it’s always wise to share the load of this responsibility with someone who can help you follow Buffett’s golden rule.
There is always the risk you will not get back what you put into an investment, but with professional guidance, you could increase your chances of success.
2. “Be fearful when others are greedy. Be greedy when others are fearful”
While this might sound like a line from an action movie, this Buffett quotation could actually be a lesson in how to work market volatility to your advantage.
Often, when there’s a market downturn, investors panic-sell their assets. They may do this because they are, as Buffett says, “fearful” – afraid of their asset value dropping even lower. When investors do this, they often crystallise a loss on those assets, setting their wealth back after years of accumulation.
An example of how panic-selling can negatively affect investors is the financial crash of November 2008. According to Forbes, US equity markets dropped by 38% within six weeks. This led some long-term investors to panic sell, some of who never regained the wealth they had accumulated through years of careful investment.
The truth is that markets usually rebound over time after financial crises.
So, while investors’ assets may have temporarily lost value, many may not have actually lost wealth in the long term if they didn’t crystallise those losses.
Some could even have bought stocks at a low price during this recession, seeing positive returns over the years as markets evened out again.
This is what Buffett would refer to as “being greedy when others are fearful”. Instead of panic-selling during a market downturn, you could use these low prices to your advantage and potentially see returns when prices rise again.
3. “Someone’s sitting in the shade today because someone planted a tree a long time ago”
As you approach midlife or retirement, you might be thinking about how your children or other dependants might benefit from your wealth after you’re gone.
Or you could be thinking about how you will afford a comfortable life once you stop work altogether.
Indeed, this famous quote from Buffett could encourage you to focus on the why of your investment strategy, not just the what.
For example, you could have begun investing as a way of growing your wealth passively over the next 30 years, so that by retirement age, you might be able to sell some assets and afford greater comfort later on.
Or, you could have a specific short-term goal in mind, such as paying your children’s university fees within the next decade.
By forming an investment strategy that focuses on your goals first, you are “planting a tree” that could help your beneficiaries, or your future self, “sit in the shade” later on.
Your financial planner can help you focus on the right type of investment for your goals and attitude to risk, helping to angle your investments towards the future you want to have.
4. “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes”
If you hold investments yourself, you will know that you can never truly predict how the market will turn. Although experts and forecasters are able to make educated predictions, the future value of your investments is never certain.
What’s more, online investing through apps could encourage quickfire investing that doesn’t involve much forethought. According to Forbes, around 9 million people a day use trading apps in the UK alone.
Heeding Buffett’s advice might encourage you to do more research into the kind of assets you’re investing in.
In addition, Buffett’s emphasis on long-term investing could spur you into a more strategic investment approach, rather than engaging in short-term investing that may not provide the results you’re looking for.
5. “It is not necessary to do extraordinary things to get extraordinary results”
Although Warren Buffett is an inspiration to many, the truth is, you don’t have to be a financial guru to yield positive results from your investments.
Indeed, even the “smallest” investments could grow over time and achieve major returns for your portfolio. For example, according to Investopedia, if you had invested $100 in Apple in 2002, your investment would have been valued at around $13,000 by mid-2019.
This is just one example of how, as Buffett says, it is not necessary to do extraordinary things to get extraordinary results. You could make strategic, budget-friendly investments that, over the course of many years, turn into a sizeable nest egg that could help provide for you in future.
Get in touch
The world of investing can be something of a labyrinth if you aren’t sure where to begin. Even if you are familiar with the process, the Covid-19 pandemic and Russian invasion of Ukraine have spooked even the hardiest of investors.
So, taking the advice of a professional who understands how to weather storms of volatility could be constructive. Although Warren Buffett’s advice is an excellent place to start, your financial planner can offer a bespoke service that prioritises your specific financial goals.
Email firstname.lastname@example.org or call 01204 300010 to find out how we can help you at Rosebridge.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.