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The Warren Buffett secret they don’t tell you about

Warren Buffett at a Berkshire Hathaway AGM

Billionaire investor Warren Buffett must be among the most-quoted people on the planet. And that’s unsurprising for two reasons. The first is that his investment skills have made him one of the richest people in the world. And the second is that he’s been keen to teach. 

Buffett’s quotable quotes

Buffett’s teaching aid of choice appears to be the quotable quote. And his nuggets of advice and sayings often sound simple. But usually when we spend some time thinking about them, they reveal the depth and richness of the wisdom backing them up.

And he’s had something to say about every stage of the investing process. For example, before we begin investing he cautions us that “rule number one is never lose money. And rule number two is never forget rule number one.”

When I first saw that quote I thought it was a bit of a joke. After all, no one would want to intentionally lose money when starting to invest in stocks and shares. But after investing for a while, I began to understand the wisdom behind the quote.

Losses work against me as an investor in a way that is skewed to the negative. For example, if I lose 50% of my invested funds, I need to make a 100% return on what’s left just to break even. 

Making losses like that could mean my investment journey ends up being nothing more than a struggle to tread water without making much forward progress. So Buffett’s advice means to me that I should approach all investments by appraising the risks first. And then I should do everything possible to minimise those risks.

For example, I can aim to mitigate risk by carrying out thorough research before buying a stock. I can analyse a business for quality, growth prospects and threats to its operations. And I can look for a keen valuation that makes sense of a long-term investment in the shares.

Walking the walk

But despite seeing that quote from Buffett maybe hundreds of times, its wisdom didn’t really sink in for me until I’d been investing for a long while. And that leads to the Buffett secret they don’t tell you about. For me, the secret to be discovered is that his investment strategy can’t be taught. Instead, it has to be learnt.

So I could read Buffett quotes all day long and maybe jot them all down in a notebook. But they won’t reveal their true power to me until I’m engaged in the process of managing my own investments.

Buffett is a great source of wisdom and advice. And as an active investor in stocks and shares I refer to him often. It seems there’s a Buffett quote to help me at every step along my investing journey. And he makes his Berkshire Hathaway shareholder letters available for all to read online, which is a useful resource.

But none of it is worth anything if I don’t roll up my sleeves and invest.

The post The Warren Buffett secret they don’t tell you about appeared first on The Motley Fool UK.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.