19 Life Changing Lessons from Warren Buffett

Warren Buffet, often called the Oracle of Omaha is a font of wisdom.

He is perhaps the most successful investor in history.

So, he knows a lot of lessons we can all benefit from.

In today's show we'll dissect 19 life-changing lessons from Warren Buffett.

1."Risk comes from not knowing what you're doing."

2."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."

• Many investors don't review their portfolio – they think their underperforming investment isn't costing them anything

3."It is not necessary to do extraordinary things to get extraordinary results."

• Property investment is simple – but not easy – buy a high growth quality asset and hold it for the long term
• So many people delay investing because they think they need to understand how it all works or to have lots of money before they can get started. You don't. Just do it. Do it now. Time is ticking, and the most powerful force in personal finance is compounding interest, but it needs time to work its alchemy.
• This quote is accurate for lots of aspects of life. You don't have to do an extraordinary amount of exercise to improve your health nor do you have to be an extraordinarily gifted athlete to get started. You don't have to be extraordinarily attractive or have an extraordinary game to ask that cute girl or boy out and find extraordinary love.
• To get extraordinary results, you just have to do a lot of normal things in the right direction.

4."After all, you only find out who is swimming naked when the tide goes out."

• Look what's happening in the property markets now – a rising tide lifts all ships, but what happens when the tide goes out?

5."Price is what you pay. Value is what you get."

6."It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

7."The investor of today does not profit from yesterday's growth."

• Look for leading indicators, not lagging indicators
• Some extreme examples are mining towns, Perth and Darwin
• The same will be said about Hobart in a few years' time

8."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."

• One way to make yourself better is to spend time with people better than you. At whatever it is you want to be better at. If you want to get in shape, join a running or cycling club. If you want to eat better, only eat with people who already eat well.

9."It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently."

10."Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars."

11."If you get to my age in life and nobody thinks well of you, I don't care how big your bank account is, your life is a disaster."

12."I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over."

• Small improvements, over time, can make a monumental difference to your habits and your life.

13."You only have to do very few things right in your life so long as you don't do too many things wrong."

• No one can be good at everything all the time. Everyone can make mistakes. But what you are good at and where you make your mistakes is what counts. If you invest early and often, you don't have to have a big, impressive career making tons of money.

14."Rule No.1: Never lose money. Rule No. 2: Never forget rule No.1."

15."I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."

• When people get greedy, prices go up. When they get fearful, the prices go down. If you follow the herd and get greedy, you are likely to overpay for something that has an inflated value. If you go against the herd, you can get a great deal.

16."Our favorite holding period is forever."

• "If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value."

17."Never invest in a business you cannot understand."

18."Someone's sitting in the shade today because someone planted a tree a long time ago."

• Long-term thinking (and investing) and planning allow us and others to reap the rewards in the future. If you saved up $500 and opened a Betterment account today and added another $500 a month ($6,000 a year) and earned an average of 7% for the next 20 years, you would have more than $265,000, over a quarter of a million dollars!
• If you got a late start and doubled those dollar amounts, $1,000 to start and $1,000 a month ($12,000 a year), but halved the amount of time to ten years, at the same 7%, you would have just over $179,000. There is no substitute for planting that tree early.

19."Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing."

The bottom line:

These Warren Buffett quotes are nearly all common sense. He doesn't claim to be smarter than anyone else (although he is), he just sticks to common sense and some core principles when he invests. We should all be like Warren.

Links and Resources:

Michael Yardney

Metropole Property Strategists

Metropole's Strategic Property Plan – to help both beginning and experienced investors

Ahmad Imam - Metropole Properties Sydney

Some of our favourite quotes from the show:

"Many investors think they understand about the property market because they know a little bit about the home that they've lived in or interest rates, but that's a risk because they don't understand the nuances of what creates property markets to move, to change… what drives property markets." –Michael Yardney

"If you can only own three or four investment properties, shouldn't you be owning the best ones?" –Michael Yardney

"There's no real way of getting something way, way below market price, because if it is, it's likely there's something you're missing." –Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how