1. ‘Success in investing doesn’t correlate with IQ … what you need is the temperament to control the urges that get other people into trouble in investing.’
From real-time stock quotes to bull vs. bear analysts duking it out on live TV, there’s a din of investing distractions today that feeds our brains a steady diet of mental junk food. Amid this noise, the big-picture focus recedes and we feel compelled to react to whatever immediate threat looms (a trumped-up clickbait headline, a momentary market disruption).
2. ‘Our favorite holding period is forever.’
Here Buffett isn’t advising people to never sell a stock. His full quote (in a 1988 letter to Berkshire Hathaway shareholders) reveals that he’s talking about picking stable companies that provide investors with peace of mind: “When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint.”
Anyone can buy stocks. Buffett shops for businesses, not ticker symbols. And remember that you’re buying, not borrowing, shares. (Another handy guideline to remember: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”)
4. ‘Be fearful when others are greedy and greedy only when others are fearful.’
You’ve done your research and purchased shares in companies that are in a good position to deliver long-term rewards. Then the inevitable happens. The share price gets slammed. Maybe it’s a victim of collateral damage during an overall market dip, or perhaps the downturn is tied to poor short-term earnings or a company/industry-specific crisis.
5. ‘In investing, it is not necessary to do extraordinary things to get extraordinary results.’
So strong is Buffett’s conviction about this simple approach to investing that in his 2013 letter to shareholders he revealed that he has provided the same instructions in his will for the trustees in charge of managing money for his heirs: “I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.”