The 18 Most Brilliant Insights From The Legendary Warren Buffett

Warren Buffett

Photo: trackrecord

Warren Buffett, the oracle of Omaha, is one of the wealthiest people in the world.  But he’s also known as the billionaire next door.  He comes off as humble and sometimes uses self-deprecating humour.Buffett also uses extremely easy-to-understand language when referring to business and investments.

Earlier this month, Buffett’s Berkshire Hathaway reported robust quarterly operating earnings.  However, net earnings plummeted due to unrealized losses on derivatives.  This had Buffett-watchers referring back to one of Buffett’s well-known quotes: “Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”

Many of his most thoughtful quotes are found in his annual letters to Berkshire Hathaway shareholders, which are must reads.  But some of his gems come from random interviews, speeches, and op-ed pieces.  Earlier today, Buffett was on CNBC being interviewed by Becky Quick.

We compiled a few of the best quotes from the Oracle of Omaha. If we’ve missed any of your favourites, let us know in the comments.

First things first

'Rule No. 1: never lose money; rule No. 2: don't forget rule No. 1'

Source: The Tao of Warren Buffett

Be greedy when others are fearful

'Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.'

Source: Letter to shareholders, 2004

When investing turns into speculating

'The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behaviour akin to that of Cinderella at the ball. They know that overstaying the festivities ¾ that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future ¾ will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands.'

Source: Letter to shareholders, 2000

The company versus the price

'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.'

Source: Letter to shareholders, 1989

On being selective

'The stock market is a no-called-strike game. You don't have to swing at everything--you can wait for your pitch. The problem when you're a money manager is that your fans keep yelling, 'Swing, you bum!''

Source: The Tao of Warren Buffett via Engineeringnews.com

On Wall Street advice

'Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.'

Source: The Tao of Warren Buffett

About socks and stocks

'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.'

Source: Letter to shareholders, 2008

No need to be a genius

'You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.'

Source: Warren Buffet Speaks, via msnbc.msn

Newton's Fourth Law Of Motion

Bad things aren't obvious when times are good

'After all, you only find out who is swimming naked when the tide goes out.'

Source: Letter to shareholders, 2001

Holding periods

'When we own portions of outstanding businesses with outstanding managements, our favourite holding period is forever.'

Source: Letter to shareholders, 1988

'Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it's the lack of change that appeals to me. I don't think it is going to be hurt by the Internet. That's the kind of business I like.'

Source: Businessweek, 1999

Time is ticking away

'Time is the friend of the wonderful business, the enemy of the mediocre.'

Source: Letters to shareholders 1989

The right moment to strike

'The best thing that happens to us is when a great company gets into temporary trouble...We want to buy them when they're on the operating table.'

Source: Businessweek, 1999

Choose sleep over extra profit

'I have pledged -- to you, the rating agencies and myself -- to always run Berkshire with more than ample cash. 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.'

Source: Letter to shareholders, 2008

On management

'I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.'

Source: unknown

In the midst of the credit crisis

'Over the long term, the stock market news will be good. 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.'

Source: The New York Times, October 16, 2008

A headscratcher

'I am a better investor because I am a businessman, and a better businessman because I am no investor.'

Source: Forbes.com - Thoughts On The Business Life

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