9 Warren Buffett Quotes for Investors to Live By

The market cap of Warren Buffett's Berkshire Hathaway (BRK.B) is about $1 trillion.

Its equity portfolio – concentrated in blue chip stocks Apple (AAPL), American Express (AXP), Coca-Cola (KO), Bank of America (BAC) and Chevron (CVX) – is worth about $250 billion. Subtract Berkshire's cash and cash equivalents of about $350 billion and that means the core operations' contribution to Berkshire's market value comes to about $600 billion.

This is a rough way of looking at Berkshire, but it goes to the point of Buffett being a master capital allocator. The company's market value reflects more than $600 billion in operating businesses, $250 billion in equities and another $350 billion in cash.

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In other words, there's a lot more to Buffett's incredible success with Berkshire than his stock-picking acumen. Rather, it was due to how Buffett chose to allocate capital over decades. He was always focused on value rather than price, and, by extension, on the opportunity cost of those allocation decisions.

For example: Buffett loves collecting dividends but Berkshire famously doesn't pay one itself. And why should it? If you invest in Berkshire Hathaway, you're telling Buffett to invest your money for you.

In effect, you're trusting Buffett to generate a better return on your capital than whatever yield the BRK.B dividend would pay. Why settle for, say, a 2% yield when Buffett has shown that he will deliver more than 2% if you let him steward the cash earmarked for dividends instead?

The bottom line is that over the past six decades, Buffett – through acquisitions, investments and opportunistic ventures – did something that's unlikely to ever be repeated. He essentially doubled the performance of the broader market.

Indeed, since 1965, Berkshire stock has generated a compound annual growth rate of almost 20%. Over the same span, the S&P 500, with dividends reinvested, delivered a compound annual growth rate of 10%.

What that meant for anyone lucky enough to get in on the ground floor with Buffett has been nothing less than astonishing. If you invested $1,000 in Berkshire stock in 1965, it would today be worth about $33 million.

The same sum invested in the S&P 500 would be worth about $336,000 today.

They say records are meant to be broken, and perhaps one day another capital allocator will surpass Warren Buffett. But it's hard to see how.

With that in mind, we've gathered some of Buffett's words of wisdom he's shared over the years. These quotes are gleaned from Berkshire Hathaway shareholder letters and are advice that all investors should live by.

1. Only in America. "Berkshire would not have achieved its results in any locale except America whereas America would have been every bit the success it has been if Berkshire had never existed. … So thank you, Uncle Sam."

2. Admit mistakes. "During the 2019-23 period, I have used the words 'mistake' or 'error' 16 times in my letters to you. Many other huge companies have never used either word over that span."

3. Cost matters. "Performance comes, performance goes. Fees never falter."

4. Seize opportunities. "Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it's imperative that we rush outdoors carrying washtubs, not teaspoons."

5. Avoid the herd. "If investors insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful."

6. Prepare for difficult times. "You only find out who is swimming naked when the tide goes out."

7. Think long-term. "If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes."

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

9. Invest like an owner. "We view ourselves as business analysts – not as market analysts, macro-economic analysts or even security analysts."

Note: The compilation of Warren Buffett's quotes first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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