My Warren Buffett Bible: A Short and Simple Guide to Rational Investing: 284 Quotes from the World's Most Successful Investor
176
My Warren Buffett Bible: A Short and Simple Guide to Rational Investing: 284 Quotes from the World's Most Successful Investor
176eBook
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Overview
Warren Buffett, chairman and CEO of Berkshire Hathaway, is widely considered the most successful investor of the twentieth century. Since the early 1950s, Buffett has proved himself to be an astute investor, and he turned Berkshire Hathaway from a struggling small textile business into the fifth-largest public company in the world, valued at nearly $350 billion.
Buffett is well known for his simple but invaluable principles regarding investing and finances, and countless businessmen and people looking to be smarter with their money and their investments have turned to Buffett for his advice. One of those people is Robert Bloch, son of the cofounder of the tax preparation company H&R Block.
My Warren Buffett Bible contains nearly three hundred quotes that Bloch has personally found to be indispensable to financial success. With the written blessing of Buffett himself, Bloch has selected the best of Buffett, wisdom that will guide you to becoming the most disciplined and rational long-term investor you can be.
Product Details
| ISBN-13: | 9781634509947 |
|---|---|
| Publisher: | Skyhorse |
| Publication date: | 09/22/2015 |
| Sold by: | SIMON & SCHUSTER |
| Format: | eBook |
| Pages: | 176 |
| File size: | 948 KB |
About the Author
Read an Excerpt
CHAPTER 1
Over a decade ago, I had the good fortune to meet Warren Buffett when he became a major shareholder in H&R Block, the tax preparation company my father, Henry Bloch, co-founded in 1955.
Warren and my father have much in common. Both entrepreneurs were born before World War II in the Mid-West and came from middle class families. They are extremely down to earth and have loads of good common sense and honesty. Without a doubt, both enjoy "the process more than the proceeds" of business and investing.
Buffett's investment principles are "simple, old, and few." Much like my father, most of Warren's success is due to his personality, character, and willingness to learn from and teach others. Of his many outstanding qualities, the role as teacher is the one for which, Warren states, he would most like to be remembered.
Recently I have made Warren my teacher and mentor by reading and re-reading his quotes until they have become a part of me. As the "Oracle of Omaha" said, "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." As investors, we should all strive to drift toward Warren's direction.
There have been dozens of books published that have attempted to capture the philosophy and personality of Warren Buffett; but words cannot really describe this amazing man ... except maybe his own words. Buffett does Buffett better than anyone. Since Warren has never written an autobiography, the quotes in this book are the most direct and unfiltered source we have.
After experiencing several bear markets over his lifetime, Warren has learned to stay the course and stick to his investing principles, when other investors were selling or rethinking their strategies. Therefore a proven discipline is an essential element in becoming a successful investor. This book has helped me become a more disciplined investor.
I am confident it will not only help you become more disciplined but also a more RATIONAL, OPTIMISTIC, and LONG-TERM investor. The ultimate act of generosity is Warren Buffett sharing his genius with the individual investor!
— Robert L. Bloch
Note: I am honored that Warren Buffett has given me written permission to use his inspiring words in this volume.
Opportunities abound in America.
* * *
In the business world, the rearview mirror is always clearer than the windshield.
American business will do just fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game heavily stacked in their favor. (The Dow Jones Industrials advanced from 66 to 11,497 in the twentieth century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression, and many recessions. And don't forget that shareholders received substantial dividends throughout the century as well.)
Risk comes from not knowing what you are doing.
* * *
Since the basic game is so favorable, Charlie and I believe it's a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of "experts," or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it.
It is more important to say "no" to an opportunity, than say "yes."
* * *
Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.
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.
* * *
To swim a fast 100 meters, it's better to swim with the tide than to work on your stroke.
Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.
* * *
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.
Buy companies with strong histories of profitability and with a dominant business franchise.
* * *
Rule No. 1: Never lose money. Rule No. 2: Don't forget No. 1.
When I buy a stock, I think of it in terms of buying a whole company, just as if I were buying the store down the street. If I were buying the store, I'd want to know all about it. I mean, look at what Walt Disney was worth on the stock market in the first half of 1966. The price per share was $53, and this didn't look especially cheap; but on that basis, you could buy the whole company for $80 million when "Snow White," "Swiss Family Robinson," and some other cartoons, which had been written off the books, were worth that much; and then you had Disneyland and Walt Disney, a genius, as a partner.
You don't want a capital market that functions perfectly if you're in my business. People continue to do foolish things no matter what the regulation is, and they always will.
* * *
We went from a wooded land to an incredible, absolute abundance of riches because the United States has had a system that can unleash human potential. Never bet against what humans can accomplish if they're operating in the right soil. And we have the right soil.
The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.
* * *
You only find out who is swimming naked when the tide goes out.
A great investment opportunity occurs when a marvelous business encounters a one-time huge, but solvable problem.
* * *
We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort level he must feel with its economic characteristics before buying into it.
I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
* * *
Overall, we've done better by avoiding dragons than by slaying them.
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.
* * *
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
People who buy [stocks] for non-value reasons are likely to sell for non-value reasons. Their presence in the picture will accentuate erratic price swings unrelated to underlying business developments.
* * *
With enough insider information and a million dollars, you can go broke in a year.
If you are not going to be an active investor — and very few should try to do that — then they should just stay with index funds. Any low-cost index funds. And they should buy it over time. They're not going to be able to pick the right price and the right time. What they want to do is avoid the wrong price and the wrong stock. You just make sure you own a piece of American business, and you don't buy all at one time.
A truly great business must have an enduring "moat" that protects excellent returns on invested capital. Business history is filled with "Roman candles," companies whose moats prove illusory and were soon crossed.
* * *
Startups are not our game. (Many of Berkshire Hathaway's largest holdings are well over a century old; American Express, Wells Fargo, Procter & Gamble, and Coca-Cola were started in 1850, 1852, 1837, and 1886, respectively.)
You only have to do a very few things right in your life so long as you don't do too many things wrong.
* * *
When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.
Berkshire's ownership interest in all four companies [Coca-Cola, American Express, IBM, and Wells Fargo] is likely to increase in the future. Mae West had it right: "Too much of a good thing can be wonderful."
* * *
The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.
I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
* * *
If you buy things you do not need, soon you will have to sell things you need.
Like Wayne Gretzky says, go where the puck is going, not where it is.
* * *
Long ago, Ben Graham taught me that "price is what you pay; value is what you get." Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down.
Before looking at new investments, we consider adding to old ones. If a business is attractive enough to buy once, it may well pay to repeat the process.
* * *
Americans are in a cycle of fear which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We'll break out of it. It takes time.
This is the one thing I can never understand. To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing "Hallelujah Chorus" in the Buffett household. When hamburgers go up, we weep. For most people, it's the same way with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don't like them anymore.
Only buy something you'd be perfectly happy to hold if the market shut down for 10 years.
* * *
The stock market is a non-called strike game. You don't have to swing at everything — you can wait for your pitch. The problem when you're a money manager is that your fans keep yelling, "Swing you bum!"
I don't invest a dime based on macro forecasts.
* * *
When investing, pessimism is your friend, euphoria the enemy.
The American economy is going to do fine. But it won't do fine every year and every week and every month. I mean, if you don't believe that, forget about buying stocks anyway. But it stands to reason. I mean, we get more productive every year, you know. It's a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market.
The ability to say "no" is a tremendous advantage for an investor.
* * *
It's been an ideal period for investors: A climate of fear is their friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance.
Tax-paying investors will realize a far, far greater sum from a single investment that compounds internally at a given rate than from a succession of investments compounding at the same rate.
* * *
The investor today does not profit from yesterday's growth.
A thought for my fellow CEOs: Of course, the immediate future is uncertain, America has faced the unknown since 1776. It's just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them (usually because the recent past has been uneventful).
* * *
If you own See's Candy, and you look in the mirror and say, "Mirror, mirror on the wall, how much do I charge for candy this fall?" and it says, "More," that's a good business.
Time is the friend of the wonderful company, the enemy of the mediocre.
* * *
If a business does well, the stock eventually follows.
In stocks, we expect every commitment to work out well because we concentrate on conservatively financed businesses with strong competitive strengths, run by able and honest people. If we buy into these companies at sensible prices, losses should be rare.
* * *
Never invest in a business you can't understand.
You should invest in a business that even a fool can run, because someday a fool will.
* * *
Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.
Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead.
* * *
There are 309 million people out there that are trying to improve their lot in life. And we've got a system that allows them to do it.
The reaction of my family and me to our extraordinary good fortune is not guilt, but rather gratitude. Were we to use more than 1% of my claim checks on ourselves, neither our happiness nor well-being would be enhanced. In contrast, that remaining 99% can have a huge effect on the health and welfare of others. That reality sets an obvious course for me and my family: Keep all we can conceivably need and distribute the rest to society, for its needs. My pledge starts us down that course.
It is optimism that is the enemy of the rational buyer.
* * *
But I think it is very easy to see what is likely to happen over the long term. Ben Graham told us why: "Though the stock market functions as a voting machine in the short run, it acts as a weighing machine in the long run." Fear and greed play important roles when votes are being cast, but they don't register on the scale.
Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.
* * *
Charlie Munger made me focus on the merits of a great business with tremendously growing earning power; but only when you can be sure of it — not like Texas Instruments or Polaroid, where the earning power was hypothetical.
The definition of a great company is one that will be great for 25 or 30 years.
* * *
Success in investing doesn't correlate with IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people in trouble investing.
There seems to be some perverse human characteristic that likes to make easy things difficult.
* * *
Periodically, financial markets will become divorced from reality.
Tomorrow is always uncertain. Don't let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all- important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential — a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War — remain alive and effective.
I tell everybody who works for our company to do only two things to be successful. They are 1) think like an owner, and 2) tell us bad news right away. There is no reason to worry about good news.
* * *
It's far better to own a portion of the Hope diamond than 100 percent of a rhinestone.
Do not take yearly results too seriously. Instead, focus on four-or five-year averages.
* * *
We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932, and 1941, America's best days lie ahead.
Inactivity strikes us as intelligent behavior.
* * *
We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen.
What the wise do in the beginning, fools do in the end.
* * *
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.
There are speed handicappers and class handicappers. The speed handicapper says you try and figure out how fast the horse can run. A class handicapper says a $10,000 horse will beat a $6,000 horse. [Ben] Graham says, "Buy any stock cheap enough, and it will work." That was the speed handicapper. And other people said, "Buy the best company, and it will work." That's class handicapping.
In fact, the true investor welcomes volatility ... because a wildly fluctuating market means that irrationally low prices will periodically be better attached to solid businesses. It is impossible to see how the availability of such prices can be thought of as increasing the hazards for an investor who is totally free to either ignore the market or exploit its folly.
Turnarounds seldom turn.
* * *
A prediction about the direction of the stock market tells you nothing about where stocks are headed, but a whole lot about the person doing the predicting.
We always live in an uncertain world. What is certain is that the United States will go forward over time.
* * *
We have a wonderful system that eventually is self-cleansing and always moves forward.
Five years from now, 10 years from now, the world everywhere will be doing better.
* * *
Our system unleashes people's potential. And we've got 312 million people that want to do better tomorrow than today. Over time, that works. This country goes forward, and it'll continue to go forward. The luckiest person in history on a probability basis is the baby being born in the United States today.
I am not a businessman, I am an artist.
* * *
A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds.
(Continues…)
Excerpted from "My Warren Buffett Bible"
by .
Copyright © 2015 Robert L. Bloch.
Excerpted by permission of Skyhorse Publishing.
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