“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
The first rule of value investing is to preserve your capital. Once you’re able to do that, then seek to make gains.
“Risk comes from not knowing what you’re doing.”
Conventional wisdom says that the higher the returns, the higher the risk. Sure there is risk to any investment, but there is only high risk if you don’t know a damn thing about your own investments.
“Diversification is a protection against ignorance. It makes very little sense for those who know what they are doing.”
Conventional wisdom also says that you need to diversify your investment portfolio to spread your risk. Once again, if you know what you are doing, you do not need to diversify. Nevertheless, if you are absolutely sure of what you are doing, diversify or not, it doesn’t really matter.
“I always knew I was going to be rich. I don’t think I ever doubted it for a minute.”
Be confident. If you’re not confident about your own judgments on a stock, don’t invest. You can seek advice and opinions, but always exercise independent thinking.
“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.”
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
Never seek quick gains. Buy a stock only if you are in for the long term. All value investors are long-term investors who are ready to hold out for at least 5-7 years. Warren Buffett is ready to hold on to his stocks forever.
“If a business does well, the stock eventually follows.”
When you’re buying a stock, you’re essentially buying the business behind the stock. In order for the stock to perform well, the business has to perform well.
“If past history was all there was to the game, the richest people would be librarians.”
“The investor of today does not profit from yesterday’s growth.”
Never make your investment decision based purely on the past performance of the market or a particular stock. The history is only good in predicting… the history!
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Warren Buffett will always seek to buy businesses that are grossly undervalued. However, the price is never the first consideration. As mentioned earlier, buying a stock is essentially buying the business behind the stock. The number one consideration should be that the company is a great company run by great people.
“Your premium brand had better be delivering something special, or it’s not going to get the business.”
A great business is one that possesses a great brand name with a strong competitive advantage over its competitors.
“Let blockheads read what blockheads wrote.”
Never take the words of analysts or any financial ‘experts’ too seriously. They can always make a forecast today and change it tomorrow. It’s better to read them for amusement rather than for advice.
“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
Buy when the market or the stock you’ve been monitoring is grossly undervalued and sell when it’s way overvalued.
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
There are bargains to be picked up only when there is fear in the market because irrational fear causes even the great companies to be grossly undervalued. Therefore it is the best time to buy when there is fear.
“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”
If you realise that you’ve made a wrong investment decision, pull out and seek out better companies to invest in rather than to hold on and pray that things will turn around.
“Time is the friend of the wonderful company, the enemy of the mediocre.”
Time will reveal the strength and tenacity of a great company and will tear apart a company that has only a beautiful front.
“We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.’”
The word ‘investor’ has been too loosely termed. The market assumes anyone who puts his/her money in the market to be an investor when the truth is, an investor doesn’t move in and out of the market on a regular basis. Only traders do that.
Cheers~
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