Investment Wiki

"When the facts change, I change my mind. What do you do, sir?"

Adapt your investment thesis when fundamentals genuinely change — not from price swings.

Selling should be driven by changes in business fundamentals, not by market volatility or emotional reactions. If the co...

"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."

Recognize sunk costs: abandoning a failing investment beats endlessly repairing it.

Pride makes investors hold losing positions, hoping to "get back to even." Buffett warns against this — if a business is...

"Have the courage to act when opportunity presents itself. Hesitation leads to missed opportunities."

Analysis without action is worthless — act decisively when opportunity appears.

Many investors correctly identify great opportunities but hesitate too long. They wait for a lower price that never come...

"I never try to buy at the bottom and I always buy too early. But that doesn't matter because I have long-term goals."

Build positions gradually rather than trying to time the perfect entry point.

Nobody consistently buys at the exact bottom. Buffett acknowledges he often buys "too early" — but it doesn't matter bec...

"If you like spending six to eight hours per week working on investments, do it. If you don't, then dollar-cost average into index funds."

For most investors, regular investing in index funds beats active stock picking.

Buffett famously bet — and won — that an S&P 500 index fund would outperform hedge funds over 10 years. For investors wi...

"Do your homework before buying anything. Thorough research is the best way to avoid risk."

Thorough research before investing is the most reliable form of risk management.

The time to manage risk is before you invest, not after. Read annual reports, study the competition, understand the busi...

"In the short run, the market is a voting machine but in the long run, it is a weighing machine."

Short-term prices are driven by sentiment, but long-term prices always converge to business value.

In any given week, stock prices are driven by headlines, emotions, and momentum. Over five or ten years, they're driven ...

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

Systematically buying during widespread fear and selling during euphoria is the essence of value investing.

This isn't about being contrary for sport — it's about recognizing that extreme collective emotions create extreme mispr...

"A climate of fear is your friend when investing; a euphoric world is your enemy."

Market fear is the value investor's greatest ally; euphoria is the greatest threat.

During crises, asset prices disconnect from fundamental value. The 2008 financial crisis, 2020 pandemic crash, and every...

"The best thing that happens to us is when a great company gets into temporary trouble."

The best buying opportunities emerge when excellent companies face temporary setbacks.

Distinguish between companies with permanent problems (disrupted business models, structural decline) and those with tem...

"Diversification is protection against ignorance. It makes little sense if you know what you are doing."

A concentrated portfolio of deeply understood businesses outperforms broad diversification.

Owning 50 stocks means you barely understand any of them. Owning 10 means you can know each one deeply. Buffett argues t...

"The stock market is a no-called-strike game. You don't have to swing at everything — you can wait for your pitch."

Extraordinary returns come from waiting for rare, obvious opportunities and then betting big.

In baseball, you must swing at borderline pitches or strike out. In investing, there are no called strikes. You can watc...

"Do not save what is left after spending, but spend what is left after saving."

Save first, spend second — this simple reversal is the foundation of all wealth.

Most people spend first and save whatever's left — which is usually nothing. Buffett flips this: set aside a fixed perce...

"The idea that you can time the market is just not true... You can't do it."

Market timing is a proven way to underperform — nobody does it consistently.

Academic research and decades of real results confirm: timing the market is nearly impossible. Missing just the 10 best ...

"I am a better investor because I am a businessman, and a better businessman because I am an investor."

The best investors think like business owners, not stock traders.

Buffett's dual identity as investor and business operator gives him unique insight. Running businesses taught him what m...

"I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years."

Invest as if the stock market will close tomorrow and not reopen for five years.

This mental exercise forces you to focus on what actually matters: business quality, competitive position, and managemen...

"When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."

Hold exceptional businesses indefinitely.

Time is the friend of the wonderful business.

"In business, I look for economic castles protected by unbreachable moats."

Seek businesses with durable competitive advantages.

Moats protect long-term profitability.

"What an investor needs is the ability to correctly evaluate selected businesses. Note that word 'selected': You don't have to be an expert on every company."

Focus on what you truly understand.

Knowing boundaries of knowledge is more valuable than expanding them.

"The three most important words in investing are margin of safety. You don't try to buy businesses worth $83 million for $80 million. You leave yourself an enormous margin."

Always buy at a significant discount to intrinsic value.

Large margins of safety compensate for errors in judgment.

"We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely."

Patience and accuracy matter more than activity.

Investment returns come from being right, not being active.

"I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will."

Invest in businesses so good they're nearly foolproof.

Great businesses survive mediocre management.

"I call investing the greatest business in the world because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! And nobody calls a strike on you."

Wait for the perfect pitch in stock selection.

In investing, you choose when to act unlike baseball.

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

Quality matters more than price alone.

Business quality is the primary criterion, price is secondary.

"Never invest in a business you cannot understand. Risk comes from not knowing what you're doing."

Only invest in businesses you can thoroughly understand.

Understanding reduces investment risk.

"The stock market is designed to transfer money from the active to the patient. Be fearful when others are greedy, and greedy when others are fearful."

Use market emotions to your advantage.

The market serves patient investors and punishes impatient ones.

"We have long felt that the only value of stock forecasters is to make fortune tellers look good. Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future."

Market predictions are unreliable and should be ignored.

Focus on business fundamentals rather than market predictions.

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

Capital preservation is the foundation of investing.

Protecting downside is more important than chasing upside.

"In looking for people to hire, look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you."

Integrity is the most important quality in business partners.

Without integrity, talent becomes dangerous.

"The only value of stock forecasters is to make fortune-tellers look good."

Market predictions are worthless noise that distract from genuine investment analysis.

No one consistently predicts where the market will go next week or next year. The entire industry of stock forecasters e...

"The power of dividends reinvested is often overlooked by investors."

Reinvested dividends are the silent engine of long-term wealth creation.

Most investors focus on price appreciation and overlook dividends. Yet historically, reinvested dividends account for a ...

"Time is the friend of the wonderful company, the enemy of the mediocre."

Time amplifies the advantage of great businesses and exposes the weaknesses of poor ones.

A wonderful company with a strong moat gets better over time — its brand strengthens, its cost advantages widen, its cus...

"The stock market is designed to transfer money from the Active to the Patient."

Patient investors systematically capture wealth from those who trade impulsively.

The stock market is a massive transfer mechanism: money flows from the impatient to the patient. Day traders, market tim...

"My wealth has come from a combination of living in America, some lucky genes, and compound interest."

Compound interest is the most powerful force in wealth creation — but it demands time.

Buffett made 99% of his $100+ billion fortune after age 50. Not because he suddenly got better at investing, but because...

"Our favorite holding period is forever. If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes."

The ideal holding period for a great business is forever.

Frequent trading generates taxes, fees, and errors. If you've found a business with a durable moat, honest management, a...

"I want to be able to make mistakes, to pay too much sometimes, and still do fine over time."

Structure your portfolio so that mistakes don't destroy your long-term performance.

Even Buffett overpays sometimes and picks companies that disappoint. The difference is that his portfolio is structured ...

"We will always be prepared for the thousand-year flood. In fact, if it occurs we will be selling life jackets to the unprepared."

Always be financially prepared for catastrophic events that others dismiss as impossible.

Berkshire's insurance empire is built on one idea: catastrophes happen. While others underestimate tail risks, Buffett p...

"Only when the tide goes out do you discover who's been swimming naked."

Bull markets mask poor decisions; only downturns reveal who was truly managing risk.

When stocks rise for years, everyone looks like a genius. Leveraged investors, momentum chasers, and undisciplined specu...

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

Wide diversification is a hedge for ignorance; deep knowledge justifies concentration.

If you don't know what you're doing, diversify broadly — buy an index fund. But if you've done deep research and truly u...

"Cash combined with courage in a crisis is priceless."

Cash reserves during good times become the ammunition for great opportunities during crises.

Berkshire consistently holds $20-150 billion in cash. Critics call it a drag on returns. But in 2008, when banks were fa...

"I've seen more people fail because of liquor and leverage — leverage being borrowed money — than any other reason."

Borrowed money amplifies both gains and losses — and the losses can be fatal.

Leverage turns temporary declines into permanent losses. If you buy a stock with 50% borrowed money and it drops 50%, yo...

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

Capital preservation is the foundation upon which all investment returns are built.

This isn't about never having a losing trade — it's about never taking a risk that could permanently impair your capital...

"Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars... and yet the Dow rose from 66 to 11,497."

Long-term optimism about productive assets is supported by centuries of economic evidence.

Through two World Wars, a Great Depression, pandemics, and countless crises, the U.S. stock market has risen from 66 to ...

"If you're already rich, what's the point of risking what you have and need for what you don't have and don't need?"

Risking what you have and need for what you don't have and don't need is financial insanity.

Many wealthy people have destroyed themselves by reaching for more when they already had enough. Long-Term Capital Manag...

"The world is not driven by greed. It's driven by envy."

Envy drives more bad investment decisions than greed ever could.

Watching your neighbor get rich on crypto or meme stocks triggers the most dangerous emotion in investing: envy. It make...

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

Long-term wealth is built by planting seeds today for shade you'll enjoy decades later.

Buffett's entire fortune was built on delayed gratification. He reinvested dividends, avoided lifestyle inflation, and l...

"If you cannot control your emotions, you cannot control your money."

Emotional investing is the fastest path to financial ruin.

Fear and greed drive the market cycle, and most investors are their prisoners. Fear causes selling at bottoms; greed cau...

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

Being right depends on facts and reasoning, not on whether others agree with you.

Consensus is comfortable but expensive in investing. When everyone agrees a stock is great, it's already priced for perf...

"The most important quality for an investor is temperament, not intellect."

Emotional discipline matters more than IQ for investment success.

A 150-IQ investor who panics during crashes will underperform a 120-IQ investor with steady nerves. Temperament determin...

"Be fearful when others are greedy and greedy when others are fearful."

Contrarian thinking is the foundation of buying low and selling high.

This isn't about being contrarian for its own sake — it's about recognizing that extreme emotions create extreme mispric...

"Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful."

The market exists to serve you with prices, not to guide you with wisdom.

Mr. Market is an emotional business partner who offers to buy or sell shares at wildly different prices each day. Someti...

"The most dangerous thing for a young investor is early success."

Early success in investing can breed the overconfidence that leads to catastrophic losses.

A new investor who makes money quickly often believes they've cracked the code. In reality, they may have benefited from...

"There seems to be some perverse human characteristic that likes to make easy things difficult."

Complexity in investing usually signals danger, not sophistication.

If an investment requires complex math, elaborate scenarios, or financial engineering to justify, it's probably not a go...

"What counts for most people in investing is not how much they know, but rather how realistically they define what they don't know."

Honest self-assessment of what you don't know prevents the costliest investment mistakes.

The most dangerous investor is the one who thinks they understand something they don't. Buffett freely admits he doesn't...

"We have a very small field. We don't try to be good at everything."

Deep expertise in a few areas beats shallow knowledge across many.

Buffett doesn't try to understand every industry or technology. He focuses on consumer brands, insurance, banking, and u...

"I call investing the greatest business in the world because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! And nobody calls a strike on you."

In investing, you can wait indefinitely for the perfect pitch — there are no called strikes.

Unlike baseball, the stock market doesn't penalize you for watching opportunities go by. You can sit with cash for years...

"I just sit in my office and read all day. That's all I do."

Relentless reading and learning is the most underrated investment strategy.

Buffett spends 80% of his working day reading. This isn't leisure — it's how he builds mental models, spots patterns acr...

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

True investment risk comes from not understanding what you own.

Most people define risk as price volatility. Buffett defines it as the possibility of permanent capital loss — and that ...

"Know your circle of competence, and stick within it. The size of that circle is not very important; knowing its boundaries, however, is vital."

Knowing the boundaries of what you understand matters more than expanding your knowledge.

Circle of competence isn't about how much you know — it's about honestly recognizing what you don't know. Buffett passes...

"Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you."

Integrity is the non-negotiable foundation — without it, intelligence and energy become dangerous.

A brilliant, hardworking person without integrity will find clever ways to enrich themselves at your expense. Buffett sc...

"An economic franchise arises from a product or service that: (1) is needed or desired; (2) is thought by its customers to have no close substitute; and (3) is not subject to price regulation."

A true economic franchise has pricing power, customer loyalty, and no close substitutes.

Buffett distinguishes between a commodity business (competing on price) and a franchise (competing on value). A franchis...

"The best business is a royalty on the growth of others, requiring little capital itself."

The best businesses grow profits without requiring proportional capital investment.

Capital-light businesses convert nearly all their earnings into free cash flow because they don't need to reinvest heavi...

"I look for businesses that are like the only bridge over a river."

The ideal investment is a business with monopoly-like economics that customers can't avoid.

A toll bridge charges every car that crosses — there's no alternative route. Buffett seeks businesses with similar econo...

"The primary test of managerial economic performance is the achievement of a high earnings rate on equity capital employed."

Consistently high return on equity signals a business with genuine competitive advantages.

ROE measures how efficiently a company turns shareholder capital into profit. A business consistently earning 20%+ ROE w...

"The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business."

Pricing power is the single best indicator of a business's competitive strength.

If a company can raise prices without losing customers, it has a genuine moat. Think Coca-Cola, Apple, or See's Candies....

"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

Bad business economics will defeat even the most talented management team.

Brilliant managers in a structurally declining industry are like great pilots flying broken planes. Buffett learned to i...

"Never invest in a business you cannot understand."

Only invest in businesses whose economics you can fully understand.

If you can't explain how a company makes money in simple terms, you can't evaluate its risks. Buffett avoided tech stock...

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

Overpaying for a great business beats getting a bargain on a mediocre one.

Early in his career, Buffett bought cheap stocks of poor businesses (cigar butts). He learned that time is the friend of...

"In business, I look for economic castles protected by unbreachable moats."

The strongest businesses are protected by durable competitive advantages that repel competitors.

An economic moat — brand power, switching costs, network effects, cost advantages — is what allows a business to earn ab...

"Every dollar of retained earnings should create at least one dollar of market value."

Every dollar retained by a company should create at least one dollar of market value.

This simple test separates great capital allocators from value destroyers. If management retains $1 billion over five ye...

"When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."

Think of stocks as partial ownership of real businesses, not as trading instruments.

When you buy a stock, you're buying a piece of a living business with employees, products, and cash flows. This ownershi...

"It is better to be approximately right than precisely wrong."

A rough estimate of true value beats a precise calculation based on flawed assumptions.

Finance obsesses over decimal-point precision in models built on uncertain assumptions. Buffett prefers a rough sense of...

"Owner earnings are the relevant item for valuation purposes — not reported earnings."

Owner earnings — not accounting earnings — reveal a business's true economic reality.

Reported earnings include non-cash charges and exclude necessary capital expenditures. Owner earnings strip away account...

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

Market volatility creates buying opportunities for disciplined value investors.

Most investors treat volatility as risk, but Buffett sees it as opportunity. When Mr. Market panics, quality stocks beco...

"We insist on a margin of safety in our purchase price. If we calculate the value of a common stock to be only slightly higher than its price, we're not interested in buying."

Demand a significant discount to intrinsic value before buying — that gap is your protection.

Margin of safety is the bridge between theory and practice. Even the best analyst can miscalculate intrinsic value, so B...

"Intrinsic value is the discounted value of the cash that can be taken out of a business during its remaining life."

Intrinsic value is the only rational benchmark for investment decisions.

Buffett defines intrinsic value as the total discounted cash a business will generate over its lifetime. This isn't a pr...

"Price is what you pay, value is what you get. They are not the same thing."

The core lesson of value investing: separate market price from intrinsic business value.

Wall Street fixates on price movements, but Buffett focuses on what a business is actually worth. Price fluctuates with ...