How to Build Wealth Like Warren Buffett 21 

Commonly Referred to Sayings of 
Warren Buffett 

• The critical investment factor is determining the intrinsic value of a business 
  and paying a fair or bargain price. 

• Never invest in a business you cannot understand. 

• Risk can be greatly reduced by concentrating on only a few holdings. 

• Stop trying to predict the direction of the stock market, the economy, interest 
  rates, or elections. 

• Buy companies with strong histories of profitability and with a dominant busi- 
  ness franchise. 

• You are neither right nor wrong because the crowd disagrees with you. You are 
  right because your data and reasoning are right. 

• Be fearful when others are greedy and greedy only when others are fearful. 

• Unless you can watch your stock holding decline by 50% without becoming 
  panic-stricken, you should not be in the stock market. 

• It is optimism that is the enemy of the rational buyer. 

• As far as you are concerned, the stock market does not exist. Ignore it. 

• The ability to say “no” is a tremendous advantage for an investor. 

• Much success can be attributed to inactivity. Most investors cannot resist the 
  temptation to constantly buy and sell. 

• Lethargy, bordering on sloth, should remain the cornerstone of an 
  investment style. 

• An investor should act as though he had a lifetime decision card with just 
  twenty punches on it. 

• Wild swings in share prices have more to do with the “lemming-like” 
  behavior of institutional investors than with the aggregate re t u rns of the com- 
  pany they own. 

• As a group, lemmings have a rotten image, but no individual lemming has ever 
  received bad press. 

• An investor needs to do very few things right as long as he or she avoids 
  big mistakes. 

• “Turn-arounds” seldom turn. 

  • Is management rational? 

  • Is management candid with the shareholders? 

  • Does management resist the institutional imperative? 

  • Do not take yearly results too seriously. Instead, focus on four- or 
  five-year averages. 

  • Focus on return on equity, not earnings per share. 

  • Calculate “owner earnings” to get a true reflection of value. 

  • Look for companies with high profit margins. 

  • Growth and value investing are joined at the hip. 

  • The advice “you never go broke taking a profit” is foolish. 

  • It is more important to say “no” to an opportunity than to say “yes.” 

  • Always invest for the long term. 

  • Does the business have favorable long-term prospects? 

  • It is not necessary to do extraordinary things to get extraordinary results. 

  • Remember that the stock market is manic-depressive. 

  • Buy a business, don’t rent stocks. 

  • Does the business have a consistent operating history? 

  • Wide diversification is only required when investors do not understand what 
  they are doing. 

  • An investor should ordinarily hold a small piece of an outstanding business 
  with the same tenacity that an owner would exhibit if he owned all of that 
  business. 

  (Extracted from various books on Buffett including Buffett: The Making of 
  an American Capitalist; Warren Buffett Speaks; Buffettology; The Warren 
  Buffett Way; Of Permanent Value; and Thoughts of Chairman Buffett: Thirty 
  Years of Unconventional Wisdom from the Sage of Omaha)