Rule 1: Never lose money; Warren Buffett’s most famous ‘Buffettisms’ or investing rules (2024)

As the recent Berkshire-Hathaway AGM just concluded, Warren Buffett was quoted saying, ““Do not make any mistakes that take you out of the game and you should spend a little bit less than you earn or you’ll never get out of debt.” The famous billionaire has a unique approach to investing and has shared many pearls of wisdom, including this, over the years. Here are some of his most famous “Buffettisms.”

“Rule #1: Never lose money. Rule #2: Never forget rule #1.”

This is perhaps one of the most famous Buffettisms, and it emphasizes the importance of protecting your capital. Buffett is known for being a value investor, which means he looks for undervalued companies and buys them at a discount. By doing this, he minimizes his risk and maximizes his potential for profit.

“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”

Warren Buffett emphasizes the importance of surrounding yourself with people who are better than you, as they can push you to improve yourself. This applies not only to business but to life in general. By spending time with people who have admirable qualities, it is easy to learn from them and become a better person.

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“Price is what you pay. Value is what you get.”

This Buffettism highlights the difference between price and value. Just because something is cheap doesn’t mean it’s a good deal, and just because something is expensive doesn’t mean it’s not worth the money. Buffett looks for value in his investments, which means he’s willing to pay a fair price for a company that has strong fundamentals and good long-term prospects.

“Risk comes from not knowing what you’re doing.”

Buffett stresses the importance of knowledge when it comes to investing. He believes that the more you know about a company and its industry, the less risky your investment will be. By doing your due diligence and understanding the risks involved, you can make informed decisions and minimize your chances of losing money.

“Be fearful when others are greedy and greedy when others are fearful.”

This Buffettism highlights the importance of contrarian thinking. When everyone is bullish on the market, it’s often a sign that it’s overvalued and due for a correction. Conversely, when everyone is bearish, it can be a good time to buy stocks at a discount. By going against the crowd, investors can often find good opportunities that others are overlooking.

“Our favorite holding period is forever.”

Warren Buffett is famously patient when it comes to investing. He believes that holding onto quality businesses for the long-term is the best way to generate wealth. This is because good companies tend to appreciate in value over time, even if there are short-term fluctuations in the market.

Warren Buffett’s “Buffettisms” reflect his unique approach to investing and his focus on value, knowledge, and long-term thinking. His focus on preserving capital, investing in quality businesses, and doing your homework have made him one of the most successful investors of all time.