When you hear Warren Buffett speak or read Berkshire Hathaway BRK.A +%’s annual letters to shareholders you can always take away a few words of wisdom. Buffett’s message is simple, you don’t have to be an investing guru or know anything about finance to be a successful investor IVSBY +%. Focus on good companies with dominant business franchises that you know and understand and hold them for the long term.
Many people are already working at the type of companies Buffett is searching for. They have an intimate knowledge of the business, management, and the prospects for the company. As insiders they may have a better understanding of their own company then the Wall Street analysts that cover it. Yet, it’s funny because they are more likely to listen to a hot stock tip from a cab driver or someone they are meeting for the first time at a cocktail party.
Buffett also says that you should not try to predict general business fluctuations or the direction of the stock market. In other words, you should not be concerned with what someone thinks the market might do, and instead focus on what the “company” will do. After all there isn’t anyone who can accurately predict markets. As the saying goes: “even a broken clock is right twice a day.”
The following quotes from the legendary investor himself should help guide you in your own investment decisions.
1. “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.”
2. “Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.”
3. “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
4. “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
5. “Never invest in a business you can’t understand.”
6. “Stop trying to predict the direction of the stock market, the economy or elections.”
7. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
8. “You only have to do a very few things right in your life so long as you don’t do too many things wrong.”
9. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
10. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
11. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
12. “Only when the tide goes out do you discover who’s been swimming naked.”
13. “It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”