3 Warren Buffett's timeless quotes

Warren Buffett, 85, is arguably the most successful investor in this century. He has amassed his fortune by investing in the stock market. At the point of writing this, he is the second richest man in America, with a wealth of more than US$60 billion!

He has generously shared his wonderful investing philosophies with us through his annual letters, interviews, books written on him etc. Also, he learned his value investing skills from Benjamin Graham, his mentor, when he was young.

There are many quotes said by Warren Buffett, my investment idol, throughout his lifetime. Below are the top 3 quotes which I think are the most educational.

Price is what you pay. Value is what you get

This quote implies that share price is different from the value of a company. Sadly, most people tend to see price as value. Share prices subject to the market's demand and supply which create volatility every minute or even second! But do you think that the true value of a company changes that frequent?

More often than not, investors are emotional. A non-fundamental bad news could make a huge impact on a company's share price. To be a successful investor, one needs to be as rational as possible by evaluating the fundamentals of a company. Unfortunately, from what I see, people tend to know everything about stock prices, but nothing at all about the value.

Risk comes from not knowing what you're doing

Academicians associate risk with volatility or Beta, but Warren Buffett strongly disagrees with this. Warren sees volatility as opportunity. For instance, a sharp plunge in share price will enlarge the beta of the stock (riskier). A successful investor will see this as an opportunity to enter the game as lower prices will magnify your potential gains, given that the fundamentals remain intact.

According to Warren Buffett, not knowing what you do is the main cause of risk. To minimize risk, an investor needs to know as much as possible on what he's doing. Successful investing requires time as well as diligence to investigate and understand a company's characteristics. The more you know about a company, the lesser your risk is.

Be fearful when others are greedy and be greedy when others are fearful.

Gyrations in the stock market represents fear and greed. Bad news might lead to indiscriminate selling of a company's shares. On the other hand, good news might cause investors to overprice the shares.

Since we can't 'short' a stock in Bursa Malaysia, only low prices present us an opportunity to buy shares at attractive prices. When a bubble caused by greed bursts, it leads to fear. An investor needs to keep his mind calm and stay focus on a company's fundamentals. If future earnings growth remains sound, debt levels remain low, cash on hand remains large, the management is capable etc., I can't see any reasons to be panicked even at low prices.

I'll sum this up as contrarion investing!

Conclusion

Ever since I started my investing journey, I have always bear these in mind because of faith and sense. Everything said by Warren Buffett, especially on value investing, makes perfect business sense to me. I hope that if you ever wanted to learn more about investments, learn from the most successful investor, Warren Buffett!

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