Warren Buffett quotes on investing. What it takes to be the best investor in the world.
Keep your own counsel
One of the most important quotes from Warren Buffett is that successful investing that not require genius, high IQ or anything like that. Rather, it requires rationality and firmness of character.
Part of this is being able to keep your own counsel. Warren Buffett was always careful to do his own financial analysis, and did not want tipsters, advice-givers or financial soothsayers.
As he notes, the value of a stock has nothing to do with popular opinion – the kind of decision-making-by-consensus that we see on Wall Street does nothing to boost investment returns. It only leads to conventional thinking and unimpressive investment results. How can you ‘beat’ the market if you are following everyone else?
Fund managers who are constantly worried about redemptions invest with a very short time horizon. Occasionally, they have to buy into a stock just because every one else is or sell a stock just because every one else is – if they are constantly benchmarking even their short-term performance against their peers, they cannot ‘afford’ to miss the next big move.
Following public opinion results in a herd mentality that creates extreme swings in volatility as stocks fall in and out of favor. This is terrible who those who are part of the herd – and devastating if someone might have used high leverage to juice up his speculative returns. Paraphrasing one of his most commonly cited quotes: you never know who is swimming naked until the tide goes out.
As Buffett notes, the main losses to investors come from their buying low-quality companies when times are good – when everything in the market seems to be rising. For example, those who invested in Kmart took a beating when the economy took a downturn, as Kmart failed to invest in supply-chain technology while its competitor Wal-Mart was a great innovator in the space. The result was that Kmart performed terribly when the recession finally hit.