Warren Buffett is famous for his wit, and will likely go down in history as one of the most quotable and influential investors of all time.
With this week marking his 89th birthday, we thought it was a good time to highlight the 25 best Warren Buffett quotes accumulated through his lengthy and prestigious career.
The Warren Buffett Series
Part 5: Wisdom from the Oracle
Today’s infographic highlights the smartest and most insightful quotes from Buffett on investing, business, and life.
It’s the fifth and final part of the Warren Buffett Series, which we’ve done in partnership with finder.com, a personal finance site that helps people make better decisions – whether they want to find the right credit card or become the next big value investor.
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After sifting through hundreds of quotes from the Oracle of Omaha, we’ve chosen the best 25 of them and sorted them into a few select categories:
Keeping it Simple
Buffett is known for putting his money in “no-brainer” businesses (i.e. Coca-Cola) that are simple to run, with long-term competitive advantages.
|Buffett Quotes on Keeping It Simple|
|#1||“Never invest in a business you cannot understand.”|
|#2||“I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”|
|#3||“I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”|
|#4||“A ham sandwich could run Coca-Cola."|
|#5||“Beware of geeks bearing formulas.”|
|#6||"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."|
|#7||“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1”|
For Buffett, how someone responds to different situations is far more important than their actual skills or knowledge level. Investors must not care what the crowd thinks, and they must be patient, focused, and decisive to maximize their potential.
|Buffett Quotes on Temperament|
|#8||"The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd."|
|#9||“It’s only when the tide goes out that you learn who has been swimming naked.”|
|#10||“Our favorite holding period is forever.”|
|#11||“Someone’s sitting in the shade today because someone planted a tree a long time ago.”|
|#12||“An investor should act as though he had a lifetime decision card with just twenty punches on it.”|
Buffett’s decision-making is driven by an assessment of value. Is the asset he is buying worth way more than it is currently being priced at by the fickle Mr. Market – if so, he’ll lay down his chips.
|Buffett Quotes on Value|
|#13||"Price is what you pay; value is what you get."|
|#14||"Be fearful when others are greedy and greedy when others are fearful."|
|#15||“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”|
A Midwestern gentleman, Buffett follows a simple and friendly style of business conduct, with deals often bounded by one’s promise or a simple handshake.
|Buffett Quotes on Conduct|
|#16||"You can't make a good deal with a bad person."|
|#17||"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently."|
At 89 years old, Buffett knows a thing or two about business and life. As a result, he’s developed some unique perspectives.
|Buffett Quotes on Perspective|
|#18||“In the business world, the rearview mirror is always clearer than the windshield.”|
|#19||“If past history was all that is needed to play the game of money, the richest people would be librarians.”|
|#20||“Failing conventionally is the route to go; as a group, lemmings may have a rotten image, but no individual lemming has ever received bad press”|
|#21||"In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."|
Life and Success
How did he build such a successful career, and how does one man generate so much wisdom?
|Buffett Quotes on Life and Success|
|#22||“The most important investment you can make is in yourself.”|
|#23||“If you get to my age in life and nobody thinks well of you, I don’t care how big your bank account is, your life is a disaster.”|
|#24||"I do more reading and thinking, and make less impulse decisions than most people in business. I do it because I like this kind of life."|
|#25||"My life couldn't be happier. In fact, it'd be worse if I had six or eight houses. So, I have everything I need to have, and I don't need any more."|
With $89.5 billion to his name, Warren Buffett is not only known for his self-made wealth and investing acumen, but also his wit and quotability. We hope this selection of the best Warren Buffett quotes helps you think about life and investing differently, and that the legendary investor continues to share his wisdom with the world.
Want more Buffett?
Don’t forget to check out the other parts of our Buffett infographic series:
- Part 1: The Remarkable Early Years of Warren Buffett
- Part 2: Inside Warren Buffett’s Brain
- Part 3: The Warren Buffett Empire in One Giant Chart
- Part 4: Warren Buffett’s Wins & Fails
Do You Know Where the British Pound is Heading?
This infographic uses the recent Brexit-related volatility of the British pound to illustrate how currency risk can impact an investor’s portfolio.
In developed economies around the world, it’s generally expected that currencies will retain their purchasing power over time.
While this is most often the case, sometimes there are situations in which currency markets begin acting in ways that are less predictable.
Growing amounts of political or economic uncertainty, for example, can cause a currency to experience amplified levels of volatility — an environment in which it may see bigger ups and downs than most market participants are used to.
Brexit, Currency Risk, and the Pound
Today’s infographic comes to us from BlackRock, and it focuses in on the recent volatility of the British pound to illustrate how currency risk can impact a UK investor’s portfolio, and how this risk can be mitigated through currency hedging techniques.
Currency risk is present in any unhedged portfolio that holds investments denominated in international currencies.
When currencies experience increased levels of volatility — such as the British pound over the last five years — it can make this risk even more evident, ultimately impacting investor returns.
Brexit in Focus
In the lead-up to the EU Referendum in June 2016, and certainly afterwards, it’s been clear that the sterling has decoupled from its typical trading patterns.
Sterling volatility, as you would know, is at emerging market levels and has decoupled from other advanced economy pairs.
– Mark Carney, Bank of England (September 2019)
Every twist and turn in the Brexit saga has helped stoke fluctuations in the value of the pound, especially in usually stable pairs such as EUR/GBP or USD/GBP. It is possible that these swings could continue throughout 2020, and even beyond.
What impact can these fluctuations have on investment portfolios, and what can investors do to avoid them?
Currency Risk 101
The challenge of currency risk is that it can affect returns, either positively or negatively.
In other words, in addition to the risk you are exposed to by owning a particular investment, you are also at the mercy of foreign exchange rates. This means the performance of your investment could be canceled out by currency fluctuations, or returns could be amplified if exchange rate movements are to your advantage.
For example, in a typical UK portfolio that holds 60% global equities and 40% global bonds, currency risk actually has the highest projected risk contribution:
Projected Risk Contribution (60/40 Global Portfolio)
- Foreign Exchange Risk: 4.55%
- Equity Risk: 3.36%
- Interest Rate Risk: 0.44%
- Spread Risk: 0.06%
- Total: 8.40%
When there is added volatility in currency markets, like in recent times, even a home-biased portfolio can be adversely affected. Given this, how can investors be sure they are getting a return from the underlying assets in a portfolio, instead of from unpredictable currency swings?
To Hedge, or Not to Hedge
There is a range of strategies that allow investors to hedge currency risk, but one simpler option may be to simply buy a fund (such as an ETF) that is hedged.
That said, not all investors may want to hedge currency risk. For example, an investor has a specific foreign exchange view (i.e. that a currency will go up or down in value) may want to purposefully get exposure to currency risk to take advantage of this view.
While it may not always make sense to use currency-hedged funds, they can reduce the overall investment risk on international exposures.
And if you are not so sure of where the pound is heading in coming months, now could potentially be a good time to explore such a tool.
Unlocking the Return Potential in Factor Investing
Factor investing has demonstrated its potential to outperform the general market for years. In this infographic, learn how to apply it in your portfolio.
What is the best way to predict success?
In baseball, the game’s strategy was forever changed when Oakland Athletics traded in the standard scout’s intuition for a data-driven approach. It was a switch that eventually led the team to an impressive 20-game winning streak, depicted in the movie Moneyball—it also kickstarted a broader revolution in sports analytics.
Similarly, successful data patterns are also being discovered by experts in the investing world. One such framework is factor investing, where securities are chosen based on attributes that are commonly associated with higher risk-adjusted returns.
Factor Investing 101
Today’s infographic comes to us from Stoxx, and it explains how factor investing works, as well as how to apply the strategy in a portfolio.
A Selective Approach
There are two main types of factors. Macroeconomic factors, such as inflation, drive market-wide returns. Style factors, such as a company’s size, drive returns within asset classes.
Analysts have numerous theories as to why these factors have historically outperformed over long timeframes:
- Rewarded risk
Investors can potentially earn a higher return for taking on more risk.
- Behavioral bias
Investors can be prone to acting emotionally rather than rationally.
- Investor constraints
Investors may face constraints such as the inability to use leverage.
Astute investors can capitalize on these biases by targeting the individual factors driving returns.
The Common Style Factors
Based on academic research and historical performance, there are five style factors that are widely accepted.
- Size: Smaller companies have historically experienced higher returns than larger companies
- Low Risk: Stocks with low volatility tend to earn higher risk-adjusted returns than stocks that have higher volatility.
- Momentum: Stocks that have generated strong returns in the past tend to continue outperforming.
- Quality: Quality is identified by minimal debt, consistent earnings, steady asset growth, and good corporate governance.
- Value: Stocks that have a low price compared to their fundamental value may generate higher returns.
It is becoming more straightforward for investors to implement these factors in a portfolio.
How Can You Apply Factor Investing?
All investors are exposed to factors whether they are aware of it or not. For example, an investor who puts capital in an ESG fund—targeting companies with good corporate governance—will have some level of quality exposure.
However, there are various approaches investors can take to implement factors intentionally.
Factors perform differently over the course of a market cycle. For example, low volatility stocks have historically performed well during market downturns such as the 2008 financial crisis or the 2015 sell-off.
Investors can consider macroeconomic information and their own market views, and adjust their exposure to individual factors accordingly.
Factors tend to exhibit low or negative correlation with each other. For a long-term strategy, investors can combine multiple factors, which increases portfolio diversification and may provide more consistent returns.
For each factor, there are investments that lie on either end of the spectrum. Experienced, risk-tolerant investors can employ a long-short strategy to play both sides:
- Hold long positions in attractive securities, such as those with upward momentum
- Hold short positions in unattractive securities, such as those with downward momentum
This diversifies potential return sources, and reduces aggregate market exposure.
Capturing Factors Through Indexing
Active managers have been selecting securities based on factors for decades. To capture factors with precision, managers must carefully consider numerous elements of portfolio construction, such as the starting investment universe and the relative weight of securities.
More recently, investors can access factor investing through another method: indexing. An indexing approach provides a framework for capturing these factors, which helps simplify the investment process. Based on objective rules, index solutions provide a higher level of transparency than some active solutions.
Not only that, their efficiency makes them more suitable as tools for building targeted outcomes.
The Future of Factors
In light of indexing’s various benefits, it’s perhaps not surprising that exchange-traded factor products have seen immense growth in the last decade.
In addition, there’s still plenty of room for factor ETF expansion in equities and other asset classes. Only about 1% of factor ETFs invest in fixed income, and 70% of surveyed institutional investors believe factor investing can be extended to the asset class.
As solutions continue to evolve, factor products could become the foundation of many investors’ portfolios.
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