Warren Buffett – chair and CEO of Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) – is regarded as one of the best investors of all time and someone most of us could learn a thing or two from in my view. Not only does Buffett have an incredible track record of investing over multiple decades, but he is also a highly effective teacher and quote artist. Our Fool colleagues over in the US have put together a comprehensive list of Buffett’s best quotes, but here are 3 I think every investor should keep in mind this week…
3 top Buffett-isms for this week
“Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market”
This is a great one to start off with. Too often, we investors get bogged down with the simplicity of trading shares. It’s easy to forget that those ticker symbols on your screen represent shares of real ownership of real businesses, not trinkets to trade and get lucky on. If all investors picked shares with the same care and dedication as their family home, I’m sure there would be a lot many more happy investors out there. So have a think about whether you’d be happy with your current portfolio of businesses if the ASX closed tomorrow for 5 years.
“Do not take yearly results too seriously. Instead, focus on four or five-year averages“
I think this quote is especially pertinent in this year of the coronavirus pandemic. Many ASX shares have been sold off throughout the year because of the effects from the pandemic and associated lockdowns . And yet for many of these businesses, there’s a decent chance of a full recovery in the years ahead that might make a decent value play today (I discussed one such example yesterday). I believe one of the factors that makes Buffett such a good investor is how he always focuses on the long-term. And putting the pandemic aside, you can almost always get a better gage of a business by looking at its numbers over multiple years anyway.
“Predicting rain doesn’t count, building the ark does”
A Biblical quote to end on, I especially like the simplicity and durability of this Buffett quote. The investing media landscape is perpetually filled with ‘experts’ predicting the next share market crash for a variety of reasons. Yes, one of them will eventually be right. But that doesn’t mean we should always listen. Share market crashes are scary, but they are also inevitable, so one of the best things to do (in my view) is accept this fact. I try and build my own ASX portfolio assuming a crash is just around the corner. That way I’m always holding ASX shares which I think will be just fine in a crash, as well as some extra cash for the opportunities a crash can bring. So don’t be worried about when the next crash will be, just make sure your portoflio can float!
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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares) and short January 2021 $200 puts on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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.
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