search
MANAGING YOUR MONEY
13 Important Lessons From Warren Buffett
By: Natalie Saar
Updated December 23, 2017
•••
Related
6 Tips to Save Using
the Most Popular
Food Delivery Apps
Learn More →
MANAGING YOUR MONEY CAR HOME RETIREMENT COLLEGE 2020 TAX CENTER
The Oracle of Omaha, or as he’s better known, Warren Buffett, has some
life lessons for us all. Buffett is one of the most successful money men in
history, but that doesn’t mean the Berkshire Hathaway Chairman and CEO
only has business smarts. Over the years, Buffett has dropped nuggets of
wisdom along the way, whether it was in interviews, books or annual
shareholder letters. Here are some important lessons from him.
1. Keep it Simple Stupid
"Value investing is so simple that it makes people reluctant to teach
it. If you've gone and gotten a PhD and spent several years learning
tough mathematics, to have to come back to this is like studying for
the priesthood and then finding out that the Ten Commandments
were all you needed."
Sometimes we can over-complicate things when all we really need to do is
“KISS” or “Keep It Simple, Stupid.” With most things, if you have the basics
down, that’s all you’ll need to get the job done.
VIDEO OF THE DAY
x

   00:02/ 00:56 x   
2. Stay Steady
"You're dealing with a lot of silly people in the marketplace; it's like a
great big casino and everyone else is boozing. If you can stick with
Pepsi, you should be O.K."
This isn’t to say you shouldn’t have fun, but when it comes to investments
and making important decisions, take a look at what’s going on around you.
Is everyone getting caught up in the hype, or is it really a good decision in
the light of day? Stay steady when making big decisions.

3. Stay Humble
"I happen to have a talent for allocating capital. But my ability to use
that talent is completely dependent on the society I was born into. If
I'd been born into a tribe of hunters, this talent of mine would be
pretty worthless. I can't run very fast. I'm not particularly strong. I'd
probably end up as some wild animal's dinner."

This quote from Buffett comes from Barack Obama’s book “The Audacity of
Hope,” and is a good reminder about staying humble. All of us have a gift in
life, but not everyone is able to use theirs to their full potential. Try to find
what your gift is, and work to use it the best you can.

4. Be Patient
"We've long felt that the only value of stock forecasters is to make
fortune tellers look good. Even now, Charlie [Munger] and I continue
to believe that short-term market forecasts are poison and should be
kept locked up in a safe place, away from children and also from
grown-ups who behave in the market like children."

If you follow Buffett’s advice over time, you’ll see that patience is a recurring
theme he brings up often, and this is no different. Investing in the short term
is a gamble but keeping a steady course provides long term returns. If you
want to lose weight, don’t give fad diets a second thought, but instead
change the way you eat and exercise into a sustainable way of life. With
most things, patience is the key.

5. Recognize When You Have a Good

Thing
"At Berkshire, we make no attempt to pick the few winners that will
emerge from an ocean of unproven enterprises. We're not smart
enough to do that, and we know it. Instead, we try to apply Aesop's
2,600-year-old equation to opportunities in which we have reasonable
confidence as to how many birds are in the bush and when they will
emerge (a formulation that my grandsons would probably update to
'A girl in a convertible is worth five in the phonebook.')."

Once again, staying humble, Buffett knows what he’s good at and what he’s
not. But he also knows how to recognize when he’s got a good thing going.
If you’re feeling like life isn’t going your way lately, take a step back and
think about the good things you do have. You may not have your dream job
yet, but for now it’s better than no job at all. A bird in the hand is worth two in
the bush.

6. Buy Low, Sell High

"Long ago, Ben Graham taught me that 'Price is what you pay; value
is what you get.' Whether we're talking about socks or stocks, I like
buying quality merchandise when it is marked down."

Buy low and sell high. That’s a common phrase heard in the investing world
for obvious reasons, but it also applies to other areas of life. If you want high
quality food, buy fresh produce when it’s in season; since it’s being harvest,
you’ll get it at a lower price than other times of year. Or if you like designer
clothes, consider shopping at retailers who carry them at a discount like
Marshall's and Ross. When you see a deal on a high quality item, go for it,
but you have to keep an eye out to snag the best ones.

7. Save Smartly
"We never want to count on the kindness of strangers in order to
meet tomorrow's obligations. When forced to choose, I will not trade
even a night's sleep for the chance of extra profits."

Buffett has always been upfront about making sure Berkshire Hathaway has
enough capital to run on it’s own, but this lesson extends far beyond stocks.
You’ve likely heard about how important it is to have an emergency savings
account, and this is one of the reasons why. While a weeklong trip to the
Bahamas may sound nice, if you don’t have a savings account to fall back
on if needed, then that lack of security isn’t worth losing sleep over just to
get away for a few days. Save smartly, and then spending will be more fun.

8. Break Bad Habits and Form Good Ones

"Chains of habits are too light to be felt until they are too heavy to be
broken."

It’s probably a safe guess that you’ve fallen into a bad habit or two in your
lifetime. Whether it’s not drinking enough water or snacking late at night,
these habits become ingrained in us and are harder to break as time goes
on. One day at a time, we slowly move further and further away from what
we should be doing, until it’s such a burden to go back that it requires
significant effort to do so. Identify some of your bad habits -- or some good
ones you’d like to start -- and resolve to begin breaking those chains today.

9. Be Wary of Pack Mentality

"Two super-contagious diseases, fear and greed, will forever occur in
the investment community. The timing of these epidemics will be
unpredictable ... We simply attempt to be fearful when others are
greedy and to be greedy only when others are fearful."

This goes with the previous principle of “buy low and sell high,” but it also
speaks to not moving with the herd. Not all trends are bad or forlorn, but
there’s something to be said about being wary of a pack mentality. No matter
what decision you’re considering, take a step back and look at the crowd
before actually following it, and make your own independent decision.

10. Slow and Steady Wins the Race

"It is not necessary to do extraordinary things to get extraordinary
results ... By periodically investing in an index fund, the know-
nothing investor can actually outperform most investment
professionals."

This basic principle has been taught in many different ways over the
centuries. You may recall the Tortoise and the Hare, which also applies. The
Hare was extraordinarily fast, but the tortoise just kept slowly chipping away
at the distance and eventually ended up winning. In different areas of life, if
doesn’t matter how fast, strong, or smart you are, it only matters that you
stick with what you set out to do.

11. Know When to Walk Away

“Should you find yourself in a chronically leaking boat, energy
devoted to changing vessels is likely to be a more productive than
energy devoted to patching leaks.”

Sometimes we put so much time and effort into something that it’s hard to
imagine it won’t work out, but the hard truth is that at some point, you need
to walk away. This is what Buffett is trying to get at. It could be a failed
startup business or a piece of Ikea furniture that just isn’t fitting together.
Walk away, and save yourself some time.

12. Buy Well-Made, Not What's Hot

“If you aren’t willing to own a stock for ten years, don’t even think
about owning it for ten minutes.”
Don’t make life harder on yourself by constantly having to update what you
invested in, and that doesn’t only mean stocks. Buy a cell phone because
it’s well made, not because it’s the hot phone of the moment. That’s the
general thinking behind this comment.

13. Invest in Relationships

“I tell college students, when you get to be my age you will be
successful if the people who you hope to have love you, do love
you.”

It sounds cliche, but at the end of the day, it’s not about your bank account
or possessions. While you’re chasing your own personal success, don’t
forget to also invest in your relationships. Making it to the top of the
mountain isn’t worth it if you are alone.

References
About the Author

Related Articles
15 Quotes From Successful
Investors That Will Change Your Life

More Than Just Turkey and Cranberries:

Making Cents of Thanksgiving

7 Tips to Reduce Financial Stress over

the Holidays

CITE THIS Did you find this

ARTICLE page helpful?
MANAGING YOUR MONEY

15 Quotes From Successful Investors That Will

Change Your Life
By: Natalie Saar
Updated December 30, 2017

•••

It takes a wise person to make millions and billions of dollars from

investments, so why not partake in some of that wisdom? From Berkshire
Hathaway CEO Warren Buffett to historically notable inventor and investor
Benjamin Franklin, here are some words to live by some some of the wisest
people in the history of investing, and not just when it comes to money.

1. Don't Lose Money

Related

6 Tips to Save Using “Rule number one: Don’t lose money. Rule number two: Don’t forget
the Most Popular
Food Delivery Apps rule number one.” – Warren Buffett

Learn More →
This seems pretty straightforward, but it’s incredible to think about how often
in our lives we lose money because of one reason or another. Las Vegas
has made billions of dollars off of people prepared to lose money without a
real hope of making it back. It may not be the golden rule, but it’s certainly
one to keep close to the chest.

2. Invest in Knowledge
"An investment in knowledge pays the best interest." – Benjamin
Franklin

Whether you're considering investing or switching careers, investing in

knowledge will pay dividends in time and money. Consider the five-hour rule
– something Oprah, Buffett and Bill Gates all adhere to. It’s simply spending
five hours a week learning something new. If you’re not already doing this,
consider adding it to your schedule for the week. There are endless
resources online to get yourself on the right track, whether it’s simple
YouTube videos, borrowing a book from your local library or subscribing to
an educational site like Skillshare or The Great Courses.

3. Don't Play it Too Safe

"How many millionaires do you know who have become wealthy by
investing in savings accounts? I rest my case." – Robert G. Allen

While this largely applies to investing, it also applies to other areas of life.
Playing anything too safe won't give you optimal results. Especially when it
comes to your money, there are some tried-and-true methods to responsibly
invest. Do you research when risk is involved, and you'll come to a logical
balance of risk and reward.

4. Know Your Investments

"Know what you own, and know why you own it." – Peter Lynch

Unfortunately, people tend to make decisions without fully understanding

why they’re making them. For example, if you have a 401(k), do you know
how it works and how it will work for your future retirement?

This goes for all types of investments and purchases, from home ownership
(do you know why you bought in a certain neighborhood? Why you paid the
price you did? If the home is in a growing area?) to cars (What’s the resale
value outlook? Are repairs expensive?). Investments, homes, cars and other
investments will always be around. Do your homework so that you make
sound decisions, even when you have a financial professional or an agent
guiding you along the way.

5. Financial Success Happens Slowly

"Investing should be more like watching paint dry or watching grass
grow. If you want excitement, take $800 and go to Las Vegas." – Paul
Samuelson

There are many things more rewarding than checking in on your 401(k) or
other investment account and seeing how much it’s accumulated over time,
but the key there is “over time.” Financial success from investing happens
slowly, not overnight. Be patient and you’ll see results.

6. Find Your Niche

"Wide diversification is only required when investors do not
understand what they are doing." – Warren Buffett

While this is true of investing, it’s also applicable to life. No one can be good
at everything. The key to success is finding your niche in life and running
with it. It’s okay to know how to do things like change a tire, but that doesn’t
mean you need to be a mechanic. What skills work for you in your life?
Focus on honing those.

7. Protect Your Reputation

"It takes 20 years to build a reputation and five minutes to ruin it. If
you think about that, you'll do things differently." – Warren Buffett

Another nugget of advice from Buffett that can be applied to both investing
and life in general. If you manage other people’s money, it just takes one
expensive mistake to lose trust forever. It’s the same in life. Sometimes it
doesn’t matter how much goodwill you’ve built up; it can be lost in a matter
of minutes. A familiar example is Hollywood stars who seemed squeaky
clean until their mugshot is slapped across the front page of every tabloid.
8. Improve Yourself
“Spend each day trying to be a little wiser than you were when you
woke up." – Charlie Munger

Here are some wise words from Buffett’s counterpart Charlie Munger. If you
want to put this into practice in your own life, at the end of each day, ask
yourself what you learned that day. It doesn’t have to be a fact from a book;
it can be an observation about your work, people close to you or something
about your own life. Try to take that lesson and internalize it in a
constructive way.

9. The 20 Percent Rule

"If you have trouble imagining a 20 percent loss in the stock market,
you shouldn't be in stocks." – John Bogle

This speaks to the concept of not overextending yourself in general, not

only when it comes to the stock market. Take a look at your income and
budget, if your paycheck was cut by 20 percent would you still be able to
pay the bills and keep the same quality of life? If not, then you might want to
find a way to cut back on 20 percent of your expenses.

10. Don't Fall into the Same Habit

“The four most dangerous words in investing: ‘this time it’s
different.’” – Sir John Templeton

Ask anyone who has jumped from one bad relationship into another, these
words don’t only apply to investing. Unfortunately, we can become creatures
of habit, which means we may habitually choose the same kinds of jobs,
friends or romantic partners despite the fact that they didn’t work out before.
It’s easy to get excited about something new and think that this time it will be
different, but chances are that it won’t be. If it’s just a financial investment
you took a gamble on again, then you can make that money back, but if it
was an investment of time, then that’s the costly mistake.

11. Figure Out Your Talents

"I just took out that old white pad: Maybe I want to be an investor.
Maybe I want to be a teacher. Maybe I want to write books. Maybe I
want to stay home and be with my kids when they're growing up. I
thought about all of that, and I was very open-minded about it, and
what I came to is: My craft is financial services. Right or wrong, that's
what I know, and I'm pretty good at it." – Jamie Dimon

Back in 2002, JPMorgan CEO Jamie Dimon had been unemployed for 18
months, and this is the advice he gave stemming from that. If you’re trying to
figure out what your next step should be, try writing down a list of things
you’re good at, and then see how you can make a living doing the ones you
like.

12. Research Your Charities

"Giving should be entered into in just the same way as investing.
Giving is investing." – John D. Rockefeller

Giving in any form is wonderful, but unfortunately there are some not-so-
genuine nonprofits out there. Before giving your hard-earned dollars, look
into the organization on a website like Charity Navigator to see how much of
their money is allocated to the the actual charity work as opposed to
administrative tasks. This way, your donation really is an investment in the
work that’s being done.

13. Learn Patience

"No matter how great the talent or efforts, some things just take time.
You can't produce a baby in one month by getting nine women
pregnant." – Warren Buffett

Patience, patience, patience. It’s a hard lesson to learn in a world that’s

moving faster by the day. But this illustration hammers the point home:
Sometimes things just take awhile, so be patient and trust the process.

14. Surround Yourself With the Right

People
"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." – Warren Buffett

Another way to say this is, "you are who you hang out with." If you want to
be a businessperson, hang out with people who are involved in that
industry. If you want to be a comedian, hang out with people who can help
you hone your skill.

15. Only Buy What You Can Afford

“If you can’t afford to buy it twice, you can’t afford it.” – Unknown

The origins of this quote are hazy, though some attribute it to an interview
with rapper Jay-Z, but regardless of who said it, the sentiment rings true. If
you want the newest iPhone, ask yourself if you can afford to buy it twice
before buying it once. Of course, there are caveats, like buying homes and
cars, but ask yourself if you can afford to make the payments twice a month
before you make them once.

References
About the Author
Managing Your MoneyAbout Us

Car Accessibility

Home Terms of Use

Retirement Privacy Policy
Copyright 2020 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved.
College Copyright Policy
2020 Tax Center Contact Us

Careers

CA Do Not Sell My Personal Information