Warren Buffett, the Sage of Omaha, is likely the world’s most famous investor. Renowned for his investing wisdom, we could all benefit from some of the sage’s insight in the next decade. Here we unpack 3 Warren Buffett quotes you should follow in the 2020s.
“The stock market is designed to transfer money from the impatient to the patient”
This quote speaks to the value of time in growing the value of investments. Those who are anxiously watching every small movement in the price of their investments, and trading as a result, may miss out of long term gains. This doesn’t mean you shouldn’t stay across events impacting your investments. It just means that short term price movements should not necessarily dictate your trading decisions.
Take a step back and look at long term trends that will impact the industries in which companies you’re invested in operate. Do your companies have a competitive advantage? How robust is that competitive advantage? Look out for things like strong brands or intellectual property that are difficult for competitors to replicate. These types of attributes can provide long term value under the right management.
“If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes”
When we own something, we tend to value it more than if we didn’t own it. This means when people buy shares and they underperform, they can be hesitant to sell them. They may hold them for an extended period, hoping they will turn around. The question you should ask yourself is whether you would buy those same shares today. If the answer is no, you should ask why you are holding them now.
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”
If you buy even a terrible company at a low enough price, sooner or later some event will likely happen that will allow you to sell the shares at some sort of profit. But it may take you 10 years to do so, in which case your return may not look so great. If you buy a great company you have the opportunity to make returns for many years to come. Warren Buffett believes in making quality investment choices and holding them for the long term. Shares like CSL Limited (ASX: CSL) consistently outperformed the S&P/ASX200 over the last decade and are an example of such a quality investment choice.
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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020