52 Must Read Quotes from Legendary Investor - Warren Buffett

Undoubtedly, Warren Buffett is the most successful investor of our time (and possibly of all time). His savvy deal making abilities coupled with his creative and cheerful personality allowed him to achieve success like no other. So it's really no luck that he's named the wealthiest man of 2008 The following is the comments made by Mr. Buffett that truly show off his knowledge! Maybe we can learn something from these quotes.

1. A public-opinion poll is no substitute for thought.
2. Chains of habit are too light to be felt until they are too heavy to be broken.
3. I always knew I was going to be rich. I don't think I ever doubted it for a minute.
4. I am quite serious when I say that I do not believe there are, on the whole earth besides, so many intensified bores as in these United States. No man can form an adequate idea of the real meaning of the word, without coming here.
5. I buy expensive suits. They just look cheap on me.
6. I don't have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It's like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though. I don't use very many of those claim checks. There's nothing material I want very much. And I'm going to give virtually all of those claim checks to charity when my wife and I die.
7. I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
8. I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
9. If a business does well, the stock eventually follows.
10. If past history was all there was to the game, the richest people would be librarians.
11. If you're in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.
12. In the business world, the rear view mirror is always clearer than the windshield.
13. Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.
14. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
15. It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction.
16. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
17. I've reluctantly discarded the notion of my continuing to manage the portfolio after my death - abandoning my hope to give new meaning to the term 'thinking outside the box.'
18. Let blockheads read what blockheads wrote.
19. Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.
20. Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases
21. Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.
22. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.
23. Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.
24. Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.
25. Only when the tide goes out do you discover who's been swimming naked. 26. Our favorite holding period is forever.
27. Price is what you pay. Value is what you get.
28. Risk comes from not knowing what you're doing.
29. Risk is a part of God's game, alike for men and nations.
30. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
31. Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway.
32. The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.
33. The investor of today does not profit from yesterday's growth.
34. 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 behavior akin to that of Cinderella at the ball. They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - 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.
35. The only time to buy these is on a day with no "y" in it.
36. The smarter the journalists are, the better off society is. For to a degree, people read the press to inform themselves-and the better the teacher, the better the student body.
37. There are all kinds of businesses that Charlie and I don't understand, but that doesn't cause us to stay up at night. It just means we go on to the next one, and that's what the individual investor should do.
38. There seems to be some perverse human characteristic that likes to make easy things difficult.
39. Time is the friend of the wonderful company, the enemy of the mediocre.
40. Value is what you get.
41. We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a 'romantic.'
42. We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely.
43. We enjoy the process far more than the proceeds.
44. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
45. We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children. 46. When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
47. Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
48. Why not invest your assets in the companies you really like? As Mae West said, "Too much of a good thing can be wonderful".
49. Wide diversification is only required when investors do not understand what they are doing.
50. You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.
51. You only have to do a very few things right in your life so long as you don't do too many things wrong.
52. Your premium brand had better be delivering something special, or it's not going to get the business

Using the investment pyramid to build portfolio

A portfolio that's right for someone else may not be best for you. The factors that make a difference are:

· Your age
· Your goals, or what you want to accomplish by investing
· The time frames for your various goals
· Your attitude toward risk—or what's called your risk tolerance.

One should also understand the ideas of asset allocation and diversification. Only then should you consider what your investment choices are and how different types of investments put your money to work.

Once you choose your asset mix, you’re ready to pick specific investments. The investment pyramid shows you have many choices within each asset class.

Using the investment pyramid
· The chart arranges various investment choices according to the risk-reward relationship.
· The higher the investment is located in the pyramid, the higher the potential return, and the higher the risk.
· Since cash and cash equivalents offer the lowest risk and return, you will find them at the bottom of the pyramid.
· Mutual funds are included in all categories because there are many different kinds of mutual funds. Each fund has its own level of return and risk.
· The classification of a stock as low, moderate or high risk depends on your point of view. What seems risky to you may not seem risky to the next person.
Note: The types of investments listed under each section of the pyramid are only a framework. The risk of each investment varies with economic conditions.

What should I ask before I buy any investment?


· Do I understand how this investment works?
· Do I have good information about how this investment has done in the past?
· Do I understand the costs of this investment and the risks?
· Am I looking for safety, income, or growth from this investment?
· Do I have good information about how this investment is likely to do in the future?
· How much can I hope or expect to make?
· What other investments do I have already? Do I want to invest in more of the same or do something new?
· How long do I plan to invest (my time horizon)?

What are the top investing mistakes to avoid?

Investing is not an easy job. Even advanced investors sometimes make mistakes. But if we set clear goals and do enough homework carefully, we'll avoid the common mistakes and have a better chance of success.

The following is the top investing mistakes:

1. Not setting clear goals.

What are you saving for and how much do you need? Are you saving for retirement? A house? A car? Will you need to use your money in five, ten or 25 years? You need to know these things before you invest. Then you can choose investments that best fit your situation. For instance, if you will need your money soon, you may want to choose safer investments. Why? You won’t have time to make up any losses.

2. Putting all your money in one type of investment.

A mix of investments often works better. If one loses, another may gain. Remember, some businesses have cycles. Some may do well in the summer, some in winter. Some will react to world events, some may not. If you put all your money in a single investment (no matter how good it seems) and something goes wrong, you could lose all your money.

Some people avoid this mistake by investing in mutual funds or exchange-traded funds (ETFs). With these products, your money goes into a mix of investments. And over time, it’s your investment mix that most affects your results. That’s why many advisers tell investors to avoid putting more than 5-10% of their money in any one investment.

3. Investing in things you don't understand.

If you don't understand how an investment provides a return to you, or how a business is organized, or how it makes money, you need to either learn more about it or consider avoiding it. Also make sure you understand what can make the price of an investment rise and fall. This will help you decide whether an investment is a good choice for you.

4. Taking chances you can't live with.

Don't invest in something that makes you lose sleep at night from worry. Most people are better with investments that they don't need to watch every day. If you're going to take chances, make sure you only invest money you can afford to lose.

5. Forgetting about your investing costs.

There are always costs when you invest. In some cases, you pay fees. For instance, you pay sales fees when you buy and sell stocks. Mutual funds charge yearly fees to cover the cost of managing your money. These fees can vary from fund to fund. So before you buy, make sure you understand and compare those costs. It will help you make better investment choices.

Also, don't forget there can be a cost to playing it too safe when you invest. If you keep all your savings in a bank account, for instance, you won't lose money. But you also give up the chance to grow your money faster. That can cost you money in a different way.

6. Following hot tips or rumours.

What looks like great information may just be noise. Make sure you know and trust the source. If you're looking for advice, get it from an expert. That's doing your homework.

7. Other common investing mistakes include
· getting too comfortable with a good investment
· hanging on too long to a bad investment
· trying to rush results
· trying to time the market
· chasing success.