Final Months of the Year: The Timeless Wisdom of Warren Buffett
As we enter into the final months of 2023, we may all benefit from some perspective. Who better to draw on for that wisdom than one of the most successful investors of our time, Warren Buffett. Buffett continues to capture the fascination of many, likely due to a combination of incredible investing success, a wholesome attitude and a modest lifestyle. He still lives in the same house he purchased in 1956. He is the co-founder of the “Giving Pledge,” which encourages the world’s wealthiest to donate the majority of their wealth to philanthropic causes, and he himself has pledged 99 percent of his wealth. He once said, “I measure success by how many people love me. And the best way to be loved is to be lovable.”
Yet, it is perhaps the consistency of his insights throughout his 92 years that makes him so appealing. His wisdom continues to be timeless. An academic study that analyzed Buffett’s shareholder meetings, which draw tens of thousands of investors from around the world each year, confirmed that the Oracle of Omaha’s key messages have recurring themes. Here are four:1
Don’t overlook the power of compounding. After a volatile year, it may be difficult to remember that growth doesn’t always occur at a steady pace. It takes time and the power of compounding to drive results. Consider that even though Buffett has been investing since he was young, over 90 percent of his wealth was made after the age of 65.2
“The nature of compound interest is it behaves like a snowball of sticky snow. And the trick is to have a very long hill.”
Invest with a view for the longer term. When Buffett invests in a company, he views himself as an owner and takes a thoughtful and longer-term view of its prospects. He worries less about what happens
in the short term, and focuses on businesses that continue to have a competitive advantage over the longer term.
“Nobody buys a farm based on whether they think it’s going to rain next year. They buy it because they think it’s a good investment over 10 or 20 years.”
Maintain self-discipline. Buffett has always said that temperament is key to investing. This may be particularly appropriate in today’s environment, where we are constantly being fed news and opinion. Buffett reminds us that investing requires the ability to detach from the views of others and make decisions based on the facts.
“You need to be able to look at the facts about a business, about an industry, and evaluate a business unaffected by what other people think. That is very difficult for most people…Don’t do anything in life where the answer is, “everybody else is doing it.” If you cancel that as a rationale … you’ll live a better life whether it’s in the stock market or any place else.”
Controlling emotions can be key to investing. We may all recall the sentiment of 2022 when excessive pessimism dominated the markets. As one economist noted, perception swung from “flawless to hopeless,” and, for many, the urge to react may have felt overwhelming. While others exited the markets, Buffett added record purchases: $66 billion in the first nine months of the year, reportedly more than 13 times the same period in 2021.3 Buffett expects that there will be the inevitable down periods, but uses them to continue building wealth for the future – strong in his conviction that brighter days lie ahead.
“To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”
As we look forward, it may be worthwhile to reflect on Buffett’s thoughts about overcoming challenges, with a view of optimism for the future:
“There will be things that happen in the world in the next 5, 10 or 20 years. That’s how the world works; it’s not a totally even course. The progress of mankind has been incredible and that won’t stop. There will be interruptions, but I also know that we’ll come out better on the other end.”
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Thank you to Warren Buffett for allowing us permission to share his timeless wisdom. Please note that the material is copyrighted and has been used with the permission of the author.
1. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3687801; 2. Based on BRK.A. 8/30/95:$25,300; 11/3/22: $428,800; 3. https://markets.businessinsider.com/news/stocks/warren-buffettberkshire-hathaway-60-billion-record-stock-purchases-portfolio-2022-8