Since Warren Buffett is often considered to be the most successful investor of all time, it’s no surprise that people look to him for advice. And, every year at his annual meeting for Berkshire Hathaway shareholders, Buffett is happy to open up the discussion to questions and share some insight.
Because of that, we have learned Buffett’s opinion on a multitude of things and received some great advice. When asked how he decides who he can and cannot trust at a previous meeting, the outcome was no different.
“Charlie and I have had very good luck buying businesses and putting our trust in people— it’s been overwhelmingly good, but we filter out a lot of people… If they say ‘it’s so easy’ it’s not so easy. We rule out people 90% of the time. Maybe we’re wrong sometimes, but what’s important is the ones we let in,” Buffett said at one of his famous shareholder meetings.
His vice president, Charlie Munger, even had something to say about it: “We’re deeply suspicious if the proposition sounds too good to be true… It’s like taking candy from a baby. We stay away from businesses like that,” Munger commented, ultimately supported Buffett’s stance.
While Buffett has quite a bit more money to toy around with than the rest of us, the basic advice remains relevant. Buffett believes that you should always err on the side of caution with investments. If it sounds too good to be true, it probably is and he rules them out. Or, if he thinks it’s an unfair price, he rules them out.
Moral of the story, do not be afraid to opt out of something if you think it’s too good to be true or it may not be fair. Buffett doesn’t think twice before turning those pitches down. Trust doesn’t come quick for him, and he avoids sticky situations by filtering out 90% of the pitches presented to him.