In the process of preparing this article, the editors at Yahoo Finance culled some of Warren Buffett’s most memorable investment quotes and adages. They were drawn from interviews, shareholder letters, and meeting transcripts. You can learn from these quotes and adages to boost your portfolio. In addition, you’ll get a feel for Buffett’s investing philosophy and how he incorporated these tips in his portfolio.
1. Value investing
A value investor likes to buy quality stocks at rock-bottom prices. He learned this from his mentor Benjamin Graham, who believed that the biggest danger in buying stocks is the wrong timing. In addition, the best stocks suffer smaller losses when the market goes down, which is why it is recommended to buy high-quality companies at low prices. Warren Buffett’s philosophy is one of patience and holding the stocks for longer periods of time than those who are more willing to sell quickly.
2. Holding a stock for “forever”
Several investors advocate for holding stocks for “forever” or for longer periods of time than is prudent. Warren Buffett, for example, says that his favorite holding period is forever. This philosophy has been proven time and again. Many Motley Fool contributors agree. Here’s why holding a stock for “forever” may be the best investment strategy. You may also find it beneficial to learn more about this philosophy.
3. Keeping some cash as a reserve
There is no reason to keep all of your money in a bank, but if you’re an investor, it makes sense to keep some of it in cash as a reserve. Buffett himself emphasized the importance of cash in his investment quotes. The reason for his advice is simple: in times of crisis, cash is the most valuable asset. In fact, he said that having some cash on hand is essential to avoid permanent losses.
4. Learning from his mistakes
As an investor, learning from Warren Buffett’s mistakes is an excellent way to ensure your own success. As the world’s wealthiest person, Buffett has made many mistakes along the way. He failed to recognize the potential pitfalls in investments such as energy companies and catastrophic insurance events, which would have destroyed his original investment.
In addition, he failed to research the company’s underwriting practices before investing. Despite these mistakes, the lessons he learned from them are applicable to any business relationship.
5. Managing risk
In investing, you should manage risk by buying at a discount to your estimated intrinsic value. Managing risk in investment quotes of Warren Buffett involves using three tools: Base Rates, filtering, and pattern recognition. Buffett relies on his vast mental database to determine which investments are worth buying at a discount.
You should also understand that risk is a constant feature of complex adaptive systems. Therefore, there is always a risk of investing in an asset with a large price sensitivity. However, if you know what to look for, you can buy stocks at a discount to their intrinsic value.