As the world’s top investor, it’s not surprising that people have been searching out investment advice from the great Warren Buffett for years. However, it seems like no matter how hard you look, any searches for Warren Buffett advice on investing tends to come up with the same classic quotes. While there is plenty of good information in those quotes, it’s always exciting to get new thoughts from the Oracle of Omaha.
Warren Buffett, in his 2016 Shareholder Letter, reiterated some of his age-old advice and even offered up some new thoughts and suggestions to anyone looking to better understand not only investing but also his opinions on investing topics. Here is some of the newest advice from Warren Buffett on investing:
1. Fear can lead to either bargains or losses
Buffett has long been known to have this mindset with the phrase, “Be greedy when others are fearful, and fearful when others are greedy.” However, in the letter released this year, he clarified the point. In that letter, he stated that while widespread fear over the inevitable market panics can help clever investors score a great deal, personal fear can lead to losing money as investors dump otherwise good companies in the heat of the moment.
A good investor understands that the market will inevitably go up and down and that even good companies will sometimes have a bad quarter. The important thing is to understand whether the company has the ability to be profitable or not in the long term. Don’t evaluate companies based on real-time market prices, but instead long term trends.
2. Market managers cost more than people realize
Whenever any kind of market manager is used, there is always a fee associated, and while 1% doesn’t sound like a lot, over time that amount can cost tons of money. In the 2016 letter, Buffett estimated that in the last decade people have wasted around $100 billion in fees and costs to investment managers. Instead, Buffett suggests that investors follow this piece of advice.
3. There is always a cut-off point
There are two different possible applications to this lesson. First, when it comes to share repurchases it’s important to evaluate the price and make sure that it makes sense. The same is true for when you’re purchasing stocks. There is always a cut-off point at which the deal is no longer a good idea. “What is smart at once price is stupid at another,” Buffett writes in the letter. Price and value are things that should always be considered when investing is concerned.