No one’s words of wisdom in the personal finance world have stood the test of time like Warren Buffett’s. Whether it’s talking about patience, discipline, or the power of time, he has a way of helping people better understand what it takes to be a successful investor.
So, for a bit of fun, we decided to take some of his most thoughtful sayings and weave them into a shareholder letter.
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
I’ve said this for years because it captures what most people miss about building wealth: patience. Patience can be hard to come by during periods of market volatility. But understand that the decisions you make today create conditions you may not see for years.
This connects to something I learned early in my career. It’s a reminder “to be greedy when others are fearful and fearful when others are greedy,” said Warren Buffett.
Most people hear this and think that I’m talking about getting rich quick. Rather, it’s about the discipline needed to be an investor. A disciplined investor knows that markets move in cycles, and that reacting to news events can put you at a disadvantage. That’s why I believe you should only buy something “you’d be perfectly happy to hold if the market shut down for 10 years.”
It’s not about timing the markets. It’s about knowing what role each investment plays in your portfolio.
Which brings me to the principle that every investor should understand. You don’t have to be smarter than the rest. You have to be more disciplined than the rest.
These are foundational elements for wealth management. You don’t need to outsmart the other person. You need a strategy that is based on your own goals, time horizon, and risk tolerance, and the patience and discipline to stick with that strategy when emotions run high.
Because I have learned from Warren Buffett, “Risk comes from not knowing what you’re doing.” Risk isn’t prices moving up and down. Risk is uncertainty that comes from not having a strategy. When you understand the why, the process tends to make more sense.
Remember that Warren Buffett said, “Time is the friend of the wonderful business, the enemy of the mediocre.” Time also is the friend of a sound portfolio strategy that’s designed to adjust with your life changes while enabling you to take advantage of opportunities along the way.
If we’ve overlooked one of your favorite Buffettisms, please send it along. We’ll see if we can work it into our next shareholder letter!
