Warren Buffett is, without a doubt, one of the most successful investors the world has ever seen.

Investopedia confirms that over nearly six decades, Berkshire Hathaway, has produced a compound yearly return of 19.9% – nearly double the S&P 500 return of 10.4% over the same period.

Now, at 94, Buffett has announced he’ll retire as chief executive of the company by the end of 2025.

This is certainly the end of an era. It could also be the perfect time to reflect on some of the words of wisdom he’s shared over the years.

Continue reading to discover three of Buffett’s most impactful insights, and what they might mean for your own investment journey.

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

Buffett is a famously risk-averse investor. He doesn’t gamble or invest in the “next big thing” simply because others are doing so.

Instead, he invests with discipline, caution, and, most importantly, knowledge.

Before you commit your money, it’s vital to research what you’re investing in and why. You may want to ask yourself:

• “What is my ultimate goal?”
• “What is my time frame?”
• “Does this investment align with my tolerance for risk?”.

For instance, a fast-growing tech company might seem like a tempting investment, but if you’re nearing retirement and require a reliable income, it might not be the right fit.

Some investments may take years to generate results. If you have shorter-term goals and need to access your wealth sooner, you’ll need to factor this in.

Working with Optimum Path can provide you with the clarity and confidence to invest in a way that truly aligns with your unique goals and circumstances.

2. “Be fearful when others are greedy, and be greedy when others are fearful”

You might be tempted to follow the crowd from time to time. After all, it’s a behaviour that has helped humans thrive and survive in the past.

Even today, if markets suddenly rise and your friends or family start generating significant returns, you might be tempted to jump on the bandwagon.

Yet, this cognitive bias – known as “herd mentality” – can mean you make decisions that don’t reflect your circumstances, goals, and tolerance for risk, ultimately affecting your long-term security.

As Buffett’s quote suggests, remaining calm, even when others aren’t, could be a more beneficial approach.

If a particular company is experiencing a sudden rise in value, it’s important to ask yourself whether this is based on solid fundamentals or simply driven by speculation.

Remember: everyone’s goals, appetite for risk, and financial situation are different. Following the crowd might offer short-term reassurance, but it could disrupt your progress towards your long-term goals.

Advice can provide an impartial sounding board, allowing you to filter out the noise and stay focused on the horizon.

3. “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes”

Patience is perhaps one of Buffett’s most powerful tools. He doesn’t chase short-term gains or obsess over daily price movements.

Instead, he takes a long-term view, investing in companies and holding stocks for years, or even decades. This mindset can be beneficial for you as well.

Granted, it can be tempting to buy and sell your investments, especially during periods of volatility. But the phrase “time in the market, not timing the market” exists for a reason. In fact, history has shown that patience often delivers better results.

Nutmeg states that if you invested money on a random day between January 1971 and July 2022, and held it for 24 hours, your chances of positive gains would be 52.4%. If you held this same investment for 10 years, the likelihood of a gain could be as high as 94.2%.

This is why Buffett once famously stated that you should “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years”.

At Optimum Path, we can provide reassurance to help you stay calm, patient, and on track.

Get in touch

Whether you’re a seasoned investor or a relative newcomer, we could help you secure some peace of mind on your investing journey.

Be sure to contact us now to find out how our Chartered financial planners can help.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.