Warren Buffett is universally regarded as one of, if the, best investors of all time. Over his six decades-plus of running Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B), Buffett has achieved investment returns that most of us can only dream of.
Fortunately for us mere mortals, Buffett has always been exceedingly generous with his wisdom and advice over the years. So here are three timeless pieces of Buffett wisdom to remember when buying ASX shares today.
3 tips on buying shares from Warren Buffett
Price and value
Many investors are taught that the markets are always efficient price makers, and they can never be wrong.
But Buffett's whole investing philosophy revolves around the inherent defectiveness of this thesis. Buffett famously said in his 2008 letter to shareholders that "Price is what you pay. Value is what you get".
We can all invest far better by following this simple piece of advice. If you wait until the markets send a good-quality company's sales down for a flimsy reason, you can make a lot of money. Why do you think Buffett has always seemed to do most of his buying during market crashes?
Just ignore the crowd
Many of the worst mistakes an investor will make come from uneasiness in not following 'the crowd'. If the markets are dumping one of your favourite shares, you can feel very silly by not following suit, perhaps because 'someone knows something I don't'.
In 2017, Buffett had this to say on this kind of heard mentality:
What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.
So if you want to invest successfully, you need to be able to invest on your own research, not on what others might think of your investments.
Play the ASX share, not the industry
Too often, investors invest in trends, not in companies. Just because lithium, for example, might play an important role in the electrification of the transport industry over the next few decades doesn't mean every lithium miner is a screaming buy right now. In 1999, Buffett had this to say on that idea:
The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.
So it will probably pay off if you analyse the companies in your ASX share portfolio with this maxim, rather than what trend they may or may not be a part of.
