9 Warren Buffett Quotes to Help You Become a Better Investor — And a Better Person
The Oracle of Omaha just turned 90, and we can learn a lot from his observations.
Warren Buffett is widely regarded as one of the greatest investors of the past century, having amassed a fortune worth more than $70 billion. Despite his stratospheric net worth, however, Buffett is revered as much for his wit and wisdom as he is for his wealth.
Buffett has never left his Midwestern roots, literally and figuratively. He still runs his Berkshire Hathaway investment fund from his hometown of Omaha, Nebraska, in the same office building he’s occupied for 50 years.
He still lives in the same house he’s owned since 1958, now estimated to be worth about $650,000. He’s known for driving used cars and wearing off-the-rack suits. And he only recently traded in his flip phone for an iPhone 11.
This Midwestern pragmatism also shines through in the countless sayings and observations Buffett has become famous for. Like many of history’s most revered sages, Buffett manages to communicate ultimate truths and profound insights with an economy of words — so much so that he has earned the moniker, “The Oracle of Omaha.”
It might seem that people pay so much attention to what Buffett has to say because, well, he’s the sixth-richest person in the world (source: Forbes magazine, November 6, 2020). But if that were true, then Jeff Bezos and Mark Zuckerberg ought to be quoted even more than Buffett.
The fact that they’re not speaks to the relevance and meaning people find in Buffett’s observations, not only as it relates to investing but as it relates to life. Jeff Bezos’s persona is that of a brilliant, obsessed genius consumed with making Amazon the biggest company in the world. Buffett’s persona is that of a kindly grandpa who just happens to be worth more than all but five other people on the planet.
The Oracle of Omaha celebrated his 90th birthday on August 30. In his honor, here are my nine favorite Buffett quotes of all time, along with a bit of my own commentary about why they resonate with me:
1. “When the tide goes out, you find out who’s been swimming naked.”
Now moving into his 10th decade of life, Buffett has seen more than his fair share of asset bubbles and crashes. As this quote and several others from him make clear, Buffett doesn’t have much regard for those who build quick fortunes by profiting from short-term economic distortions like the dot-com bubble in the late 1990s and the real-estate bubble in the mid 2000s.
As we saw when residential real estate values began to decline unexpectedly in 2007, sometimes it only takes one change in the economic environment to bring the entire house of cards down. And that’s when you find out who’s been “swimming naked.”
2. “Opportunities come infrequently. When it rains, put out the bucket, not the thimble.”
To me, this quote speaks to wisdom and discipline as much as boldness. As Buffett made clear in the prior quote above, he’s not a fan of speculative investing or chasing the latest hot stock. To the contrary, his biggest indicator of when to become more aggressive is when the stock market goes into a steep, prolonged downturn.
It’s in those times that stocks effectively go on sale, with share prices of thousands of companies deeply discounted. Bear markets are exactly those “infrequent opportunities” Buffett is referring to, and long-term investors should take advantage of them. Alas, they’re also the times when the majority of investors do the exact opposite and flee stocks for the perceived safety of bonds and cash.
3. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
This quote from Buffett seems so obvious that it shouldn’t even be notable. And yet we only need to read the endless stream of stories about the politicians, business executives and celebrities who are regularly trashing their reputations through all manner of terrible personal behavior to realize it’s not as obvious as it seems.
Personally, whenever I feel like I’m tempted to indulge the worst of my instincts — like going full road-rage on someone who’s just flipped me the bird in traffic — I remember all those viral videos with the millions of views that capture people doing the same thing. It doesn’t end well for those people, and I definitely don’t want to be one of them.
4. “If you invested in a very low-cost index fund — where you don’t put the money in at one time, but average in over 10 years — you’ll do better than 90% of people who start investing at the same time.”
Buffet is often described as the most successful stock-picker ever — but that doesn’t tell the whole story. Buffett isn’t some stock jockey who sits at his computer watching the ticker and diving in and out of stock positions.
His extraordinary talent is actually in acquiring sizable positions in the stocks of the companies he likes and then having a role in their corporate governance. He is, or has been, a board member and/or director at Kraft Heinz, Washington Post Co., Coca Cola, Gillette, Salomon Smith Barney, and many others.
His Berkshire Hathaway investment fund owns 18% of American Express, 9.5% of Bank of America, 26.70% of Kraft Heinz, and 9.98% of Wells Fargo. It also acquired and wholly owns more than 60 subsidiary companies, including GEICO, Fruit of the Loom, and Dairy Queen.
Clearly, Warren Buffett is an extraordinary business executive and has amassed his fortune by positioning himself to exert his considerable influence on the companies in which he invests.
That’s a far cry from just being a “stock picker.” While Buffett doesn’t discourage people from picking their own stocks, he also knows that the vast majority of people don’t have the time, discipline or interest in doing the research it requires. That’s why he’s a big advocate of index funds for most individual investors.
5. “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
As with so much of Warren Buffett’s investment advice, this quote seems like just plain, old common sense. Everyone knows that stocks are meant to be long-term investments, right? And yet when we look at the data, we see the opposite to be true.
In the first half of the 20th century, the average holding period of a stock ranged between 4 and 8 years. But as technology advanced in the 1970s and more investors gained the ability to manage their own brokerage accounts online, the average holding period for stocks has plummeted and is now measured in months instead of years.
In fact, according to Reuters, the average holding period for a stock on the New York Stock Exchange was 5 ½ months in June of 2020!
In the investment world, “long term” historically was defined as 10 years or longer (and preferably 15 to 20 years), while mid term was between three and seven years, and short term was one to three years. It speaks volumes (pun intended) about the mentality of investors today that the average holding period of a stock is shorter than the traditional definition of “short term.”
6. “I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business.”
This quote really resonates with me on a personal level, because I often feel guilty that I’m not being productive if I’m just thinking and not actively engaged in some project or task. We only have to remember that all the great ideas in human history have come from people who allowed themselves permission to just…think.
When we give ourselves space to do this, new connections, ideas and observations come to us that never do when we are, say, responding to emails, paying the bills, or scrolling through Facebook.
Ultimately, we need to take action to solve our problems or bring new ideas to reality — but we also need to allow ourselves the space and time we need for creative and critical thinking without berating ourselves that we’re not being “productive.”
7. “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”
This quote from Buffett came from a New York Times Op-Ed column he wrote in October 2008, just as the Financial Crisis was going into warp speed. I still remember reading his column when it was published, because even though I was a wealth manager at that time, I needed some reassurance of my own.
Although I’d been in the business for 15 years at that point, neither I nor anyone else in my industry had ever experienced anything like the systemic meltdown that was occurring in the global financial system in the fall of 2008. It was my job to keep my investment clients calm and reassured in that scary time, yet when I looked at the economic chaos that was getting worse by the day, it was often hard for me to keep a long-term perspective.
Buffett’s column went viral through the investment industry, a sign that his steady, sturdy perspective was as needed by investment professionals as it was the clients they served.
It’s also worth noting that, from the time Buffett’s column was published on October 16, 2008 to October 16, 2020, the Dow climbed from 11,497 to 28,606. While his advice to stay the course seemed foolhardy to many people at the time, history has — yet again — proven Buffett right.
8. “We’ve long felt that the only value of stock forecasters is to make fortune tellers look good.”
We are bombarded with predictions from the so-called experts about the stock market on a daily basis, and in real time they often seem compelling. They are blasted constantly across web sites and news networks and into the consciousness of the investing public.
Rightly or wrongly, many investors view these predictions as guidance; it influences their worldview, and, as a result, their decision making.
As Buffett points out, the reality is that market pundits know as much as you or I do about the near-term direction of stocks — which is nothing. We can be confident about the long-term direction of the broad stock market, which is “up.” But in the short term, stocks are heavily influenced by events that are unforeseen and whose impacts are unpredictable.
If you need an example, go back and see how many stock forecasters in late 2019 correctly predicted the massive economic impacts of a new, highly contagious Coronavirus in early 2020. As you will see, there weren’t any, and all the thousands of forecasts from that time were utterly worthless as a result.
9. “You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what it’s worth at current gold prices, you could buy — not some — all of the farmland in the United States. Plus, you could buy 10 ExxonMobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”
This may be my favorite Warren Buffett quote of them all. In less than 100 words, he shreds the notion that gold is a good long-term investment. His point is clear: gold produces nothing and has no intrinsic value beyond what investors ascribe to it.
Mankind’s fascination with gold is deeply wired in our psyches, going back tens of thousands of years — but it’s only real “value” is in its scarcity and its perceived benefit as a hedge against inflation.
Unlike companies, gold doesn’t produce any goods or services that people need, doesn’t pay dividends, and doesn’t innovate. On top of this, stocks have proven to be a better hedge against inflation than gold. As Buffett says, which would you take?
So there you have it — wit and wisdom from the Oracle of Omaha to guide you in both your financial and life decisions. And, just in case you think he’s perfect, here’s a bonus quote from Buffett after his friend Bill Gates let it slip that Buffett’s dietary regimen on road trips largely consists of McDonald’s and Oreo cookies!
“I checked the actuarial tables, and the lowest death rate is among six-year-olds. So I decided to eat like a six-year-old.”
20+ years as managing principal of a wealth management firm. Currently helping people make amazing BBQ through SmokeBloq, an IoT cooking thermometer.