In my previous post, I presented three Warren Buffett quotes and explained what they meant. Since there are just so many nuggets of wisdom that Mr. Buffett has provided over the years, I want to continue to put out more posts dedicated to his knowledge.
“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”
Here, Mr. Buffett is emphasizing that when you buy a stock, you’re ultimately buying a piece of a company. You want to make sure that the company is strong fundamentally. You want to make sure that the company can generate cash flows, is well run, and will be around for the long run. The strength of the company is much important than its exact price. However, that is not to say that you should overpay for that company. You should at least the very least pay a fair price.
“I always knew I was going to be rich. I don’t think I ever doubted it for a minute.”
This quote is all about self-belief. You must believe that you deserve to achieve your goals and work towards it if you want to be successful. Mr. Buffett was an extremely driven and ambitious person, even at a young age. He purchased his first stock when he was 11!
“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”
Modern day business programs teach a lot of frameworks, theories, and models. Business decisions can be based on complicated theories and lots of data. However, Mr. Buffett is a believer in simplicity. That is how he always approached investing. If the business model was too difficult for him to understand, then he would avoid it. Therefore, he stuck to a lot of traditional, cash generating businesses such as railroads, consumer products, and insurance companies. He understood those businesses inside out. The same goes for you. Before investing in anything, you want to understand the business and why it makes money. Don’t overcomplicate things or bite off more than you can chew.
“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 the 130 IQ.”
This quote is very important. It tells us that you don’t need to be a genius to be a successful investor, nor do you need to be highly educated. Investing isn’t rocket science, but it requires perspective, discipline, patience, and curiosity much more than it does intelligence. Your temperament is more important than your brain. You’re ultimately looking for successful companies and not trying to find the cure for cancer.
Professional Development and Personal Finance Blog