Warren Buffett: 8 Mistakes Every Investor Makes

warren buffett aka arguably the greatest investor in the world has been investing for a long time he started when he was just 11 years old and now he's 90 so that's 79 years of investing experience that we can learn from and throughout his time he's made a lot of mistakes as well as seen a lot of mistakes that the average investor makes i'm gonna let him explain eight very important ones that we can all learn from i was just wondering what is what would you consider to be the worst investment you've ever made the worst investment i ever made the biggest mistakes are the ones that actually don't show up they're the mistakes of omission rather than commission we've never lost that much money on any one investment but it's the things that i knew enough to do that i didn't do we have missed profits of as much as you know maybe 10 billion dollars in things that i knew enough to do and i didn't do it and the question we get most frequently from people about you coming on is what should they be buying right now so if i say buy you say i i say basically whole i mean the the idea that the european news or slowdown in this or that or anything like that that would not cause you if you owned a good farm and had it run by a good tenant you wouldn't even sell it because somebody said here's a news item you know this is happening in greece or something of the sort if you owned an apartment house and you got to raise your rent a little as well located you had a good manager you wouldn't dream of selling it uh if you had a good business personally um the local mcdonald's franchise you know you would you wouldn't be thinking about buying or selling it every day now when you own stocks you own pieces of businesses and they're wonderful business you can pick the best businesses in the world and to buy or sell on current news is is is just crazy you're in a wonderful business you got people running it for you you know you're going to do well over five or 10 years and do think news events should cause you to try and dance in and out of something that's a wonderful game is a terrible mistake so get into a bunch of wonderful businesses and stay with them well i made a lot of mistakes biggest mistake well not the biggest necessarily the biggest but but buying berkshire hathaway itself was a mistake because berkshire was a lousy textile business and i brought it very cheap i'd been taught by ben graham to buy things on a quantitative basis look around for things that are cheap and that i was taught that we'll say in 1949 or they made a big impression on me so i went around looking for what i call use cigar butts of stocks and the cigar butt approach to buying stocks is that you walk down the street and you're looking around for cigarettes and you find this obviously this terrible looking soggy ugly looking cigar one puff left in it but you pick it up and you get your one puff disgusting you throw it away but it's free i mean it's cheap and then you look around for another soggy you know one puff cigarette well that's what i did for years it's a mistake uh although you make money doing it but you can't make it with big money it's so much easier just to buy wonderful businesses so now i would rather buy a wonderful business at a fair price than a fair business at a wonderful price i went in the u.s air i bought a preferred stock in 1989 uh as soon as my check cleared the company went into the red never got out i mean it was a really dumb i mean i've got an 800 number i call now whenever i think about buying an airline stock i call them up any hour that fortunately i call them at three in the morning and i just dial and i say my name's warren i'm an aeroholic you know what i'm thinking about buying this thing and then they talk me down i mean it takes up it takes takes hours sometimes but it's worth it believe me uh if you ever think about that airline buying an airline stock call me and i'll give you the 800 number because you don't want to do it we don't do very many things but when we get the chance to do something that's right and big we've got to do it and even to do it in a small scale is just as big a mistake almost is not doing it at all i mean you've really got to you got to grab them when they come because they you're not gonna get 500 great opportunities you would be better off if when you got out of school here you got a punch card with 20 punches on it and every big financial every financial decision you made you used up a punch you get very rich because you'd think through very hard each one he went to a cocktail party and somebody talked about a company he didn't even understand what they did or couldn't pronounce the name but they made some money last week and another one like it you wouldn't buy it if you only had 20 punches on that card there's a temptation to dabble if particularly during bull markets uh in stocks it's so easy you know it's easier now than ever because you can do it online you know just you click it in and maybe it goes up a point and get excited about that and you buy another one the next day and so on you can't make any money over time doing that but if you had a punch card with only 20 punches you weren't going to get another one in the rest of your life you would think a long time before every investment decision and you would make good ones and you'd make big ones and you probably wouldn't even use all 20 punches in your lifetime but you wouldn't need to investors behave in very human ways which is they get very excited during bull markets and they look in the rearview mirror and they say i made money last year i'm going to make more money this year so this time i'll borrow you know or or the neighbor says you know i wasn't in last year when that neighbor was dumber than i made a lot of money so i'm going to go in this year so they're always looking in the rearview mirror and when they look in the rearview mirror and they see a lot of money having been made in the last few years they plow in and they just push and push and push on prices and when they look in the review mirror and they see no money having been made they just say this is a lousy place to be so they don't care what's going on in the underlying business and it's it's astounding but that's that makes for a huge opportunity just huge opportunity i mean i've lived through roughly half in an investing sense about half that period and i've had that long period of stagnation from 48 i mean from 65 to 82 17 years i wrote an article for forbes in 1979. i just said how can this be pension funds in the in 1970 put a hundred and some percent of their new money in stock because they were wild about stocks then they got a lot cheaper and they put a record low in nine percent of their net new money and in 1978 when socks were way cheaper people behave very peculiarly in in in terms of their reactions because they they're human beings and they they get excited when others get excited they get greedy when others get greedy they get fearful when others get fearful and they'll continue to do so and you will you know you will see things you won't believe in your lifetime and securities markets unless you find the the prices of a great company really offensive if you if you feel you've identified it and by definition a great company is one that's going to remain great for 30 years it's going to be great a great company for three years you know it ain't a great company i mean it so you really want to go along with the the idea of something that if you were going to take a trip for 20 years you wouldn't feel bad leaving leaving the money in with no orders with your broker and no power of attorney or anything and you just go on the trip and you know you come back and it's going to be a terribly strong company [Music] i think it's better just to own them i mean you know we could we could attempt to buy and sell some of the things that we own that we think are fine businesses but they're too hard to find i mean we we found c's candy in 1972 where we find here and there we get the opportunity to do something but they're too hard to find so to to sit there and hope that you buy them in the in the throes of some panic uh you know that you'd sort of take the attitude of a of uh a mortician you know waiting for a flu epidemic or something i mean it it i'm not sure that that uh i'm not sure that's a will be a great technique you know i think if you like the if you like the business and you like the person who's coming to you and the price sounds reasonable and you really know the business i think probably the thing to do is to take it and don't worry about how it's quoted and it won't be quoted tomorrow or next week or next month i think people's investment would be more intelligent if you know stocks were quoted about once a year but it isn't going to happen that way the country will do very well over time but you will see these huge waves and and if you can stay objective throughout that if you can detach yourself temperamentally from the crowd you get very rich and you won't have to be very bright i mean it i'm sure you are but but you want you know it just it doesn't take brains it takes temperament it takes the ability to sit there and look at something when i started out in 1950 i would go through and find things at two times earnings and they were perfectly decent businesses and people wanted jobs at those companies and everybody knew they were gonna be around and they wouldn't buy them at two times earnings and that's when interest rates were two and a half percent you know i went to the i started selling securities when i was 21 and a kansas city life insurance company happened to be a fairly prominent company in omaha and the policies they sold you if you were buying life insurance from them had a built-in assumption of two percent interest the stock of kansas city life was selling at less than three times ernie you're getting 35 percent if you bought the stock no question about the soundness of the company i went to the local agent i thought i figured hell i'll be able to sell him a few shares of stock i mean the guy would understand him he's got his whole life invested in this company i went to local agent we've been with him for 20 years and his name was moose i said mr moose i said you know you're selling these policies with two percent you may even have a few on members of your own family and you can buy into this company whose paycheck you depend on every month and you know and whose future you your your beneficiaries and these life policies depend on and who you're selling them you know two percent investment on and you get 35 on your money yeah sudden you know stocks aren't any good and and i couldn't i couldn't tell you you know i was a lousy salesman i mean well you have to start with that but but uh it just blew me away it blew me away i thought sometimes i used to wonder if i was nuts you know because the thing is if you can spare yourself from making these common investment mistakes you can save a lot of money a mistake can cost you twenty percent fifty percent sometimes a hundred percent of your investments this can take years or tens of years to make it back up so it's important that we don't just follow the madness of crowds we don't just wait for a crash that we don't give in to fear and greed or dance in and out of stocks because making these mistakes can cost us a lot of money and it always helps when we can learn from the greatest investor of all time

Channel: Cooper Academy

Views: 372,475

Rating: 4.8680429 out of 5

Keywords: warren buffett, warren buffett advice, warren buffett investing, warren buffett investment advice, warren buffett advice to investors, warren buffett advice for beginners, warren buffett stock advice, investing mistakes, investment mistakes, stocks, investing

Id: xiwrpXTURY4

Length: 11min 41sec (701 seconds)

Published: Tue Aug 17 2021

Reddit Comments

[u/IIUSA]

I bought more on Friday .... who else is with me?

[u/Single-Lie-5388]

Bought my first 800 shares on Frida

[u/Prestigious-Gur-80]

If you’re worried be a retard like me and buy 54 calls on SQQQ on a two month expiration timeframe. It’s just a quick hedge in case a sudden drop on my portafolio.