Today is the 92nd birthday of US mega-billionaire Warren Buffett, who was born way back on 30 August 1930 in Omaha, Nebraska (where he still lives today). Happy birthday, Warren!
Despite his advancing years, Buffett retains his remarkable mind — and remains chairman and CEO of Berkshire Hathaway (BH). In 1965, Buffett took control of this small textiles manufacturer and — with right-hand man Charlie Munger (aged 98) — built it into the $658bn conglomerate it is today.
For me, Buffett is undoubtedly the best investor the modern world has ever seen. Even after donating tens of billions of dollars to good causes, today he has a personal fortune exceeding $104bn. But what I admire most about the Oracle of Omaha are the wise words and homespun wisdom he offers to other investors. Here are five of my favourite Warren Buffett sayings:
1. “Rule #1 is never lose money. Rule #2 is never forget Rule #1”
Of course, investing is all about taking risk. Indeed, one Russian proverb states, “He who takes no risk drinks no Champagne”. But I’ve learnt to my cost that taking too much risk also left me without Champagne. At last, I understand that shares are not lottery tickets. Nowadays, my investments are sensible bets on the long-term futures of solid businesses.
2. “If you don’t find a way to make money while you sleep, you will work until you die”
What Warren Buffett is talking about here is passive income: unearned income I make outside of work. To me, passive income is essential, because I’m lazy and I like the idea of making money while I sleep. For me, the best form of passive income comes from UK shares paying high dividends. For example, I recently created a new mini-portfolio that included four stocks with cash yields above 8.5% a year. Nice.
3. “Price is what you pay; value is what you get”
In his 2008 letter to BH shareholders, Buffett wrote that legendary value investor Ben Graham taught him this valuable lesson. In other words, price and value are two sides of one coin. This quote reminds me to buy shares in quality businesses when they are discounted or on sale. For me, that’s the very heart of my value investing.
4. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”
Here, Warren Buffett reminds me once again not to waste my money buying into inferior businesses. Instead, I should buy shares in great companies at reasonable prices. For example, I recently bought stock in America’s second-largest supermarket chain, following steep falls in its market value. This stock has since rebounded strongly from its June lows.
5. “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold”
Warren Buffett wrote this in 2016 to remind investors of the outstanding gains to be made during market meltdowns. I’ve taken note of this wisdom twice since then, reinvesting half of my family’s wealth back into stocks during March 2020’s Covid-19 crash. Also, we bought shares in mid-2022, after the worst first-half start for US stocks since 1970. And both decisions have proved highly profitable — so far, at least!