New to Investing? Here’s 1 of Warren Buffett’s Most Important Quotes

As market uncertainty continues to intensify, here’s some advice from the Oracle of Omaha to help you navigate this environment.

| More on:
close-up photo of investor Warren Buffett

Image source: The Motley Fool

Warren Buffett is well-known as one of the best investors of all time. While many of the richest people in the world have started businesses or created new products, Buffett has built his wealth simply through buying stocks.

In fact, from 1965 through to the end of 2021, Buffett had grown his holding company Berkshire Hathaway’s market value by over 3,600,000%, or a compound annual growth rate of more than 20%.

In comparison, the S&P500 had grown at a compound annual growth rate of 10.5% over that time period, which equates to a total return of just 30,200%, compared to Buffett’s 3.6 million.

But while Buffett’s results make him seem like a genius, in reality, he uses a simple buy-and-hold method. One of his greatest strengths is the fact that he can be exceptionally disciplined and patient, two key traits all investors need in order to be successful.

As market volatility continues to pick up, whether you’re new to investing or have been around the block a few times, here’s a simple reminder from Warren Buffett on how to keep a long-term outlook and stay disciplined.

One of Warren Buffett’s most famous quotes

Buffett has several famous quotes that can really help investors gain perspective on finding high-quality stocks to buy, with a focus on looking for companies that you can own for the long haul.

Perhaps his most famous quote came from his 1986 letter to shareholders when he wrote, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

We all know that the stock market goes through inevitable cycles. Rather than becoming fearful when the market is selling off and rushing to sell your stocks at one of the worst times, it’s better to be greedy and look for the best bargains you can find.

There is no better time to buy stocks than during a stock market pullback. However, you shouldn’t just buy any stock.

It’s not easy to put your money to work and buy companies that have been consistently losing money all year. However, if you can find businesses that you have confidence in, ones that are positioned to survive a recession and continue growing for years and decades to come, then buying them at a discount today is a significant opportunity.

Here’s why buying the dip can be so crucial

For a great example of the payoff that can come from buying the dip and holding long-term, let’s look back to 2008 and consider Canadian Pacific Railway (TSX:CP)(NYSE:CP). Railway stocks have always been blue-chip investments that offer excellent long-term growth since rail is the most efficient mode of transportation.

And before the market sell-off in 2008, CP Rail traded at around $15 a share. By the time the stock hit its low in early 2009, it had sunk more than 50% to below $7 a share.

So, investors who bought right before the selloff, panicked and sold in the downturn, would have locked in a loss. Had you held the stock, you would have seen it recover in price by late 2010 and early 2012 when it began to post significant gains.

That’s why it’s crucial to find high-quality, reliable stocks and hold them for the long haul.

However, if you were to take it a step further and buy during the selloff, then become greedy when the market was fearful, you could have earned a massive return on investment.

Even if you missed the bottom and bought the stock for $8 a share and held it until today, you’d have earned a total return of more than 1,300%. Had you waited for the stock and market to recover fully and bought at around $11.50 a share later in the year, that investment would have grown 725%.

That’s still a significant return thanks to the buy-and-hold strategy that Warren Buffett has made so famous. To be successful in investing, take advantage of major market selloffs, such as what we’re seeing today, and think long-term.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

retirees and finances
Stocks for Beginners

TFSA Investors: 3 Solid Stock Ideas for Your $6,500 Limit in 2023

Here are three potential long-term winners for TFSA investors.

Read more »

Man considering whether to sell or buy
Stocks for Beginners

December 2022: Is it Better to Pull Your Money Out of the Stock Market or Keep Investing for Now?

Time in the market always beats timing the market. Diversify and stay the course.

Read more »

Paper airplanes flying on blue sky with form of growing graph
Stocks for Beginners

Stocks That Are Actually Soaring in a Down Market

Fairfax Financial Holdings and another TSX stock that's powered higher through a bearish 2022.

Read more »

railroad
Stocks for Beginners

CP Stock Could Be the Best Buy on the TSX Today

CP (TSX:CP) stock has been one of the few top performers on the TSX this year, and it should continue…

Read more »

falling red arrow and lifting
Stocks for Beginners

3 TSX Stocks That Could Rally Before 2023 Begins

Here are three TSX stocks to consider, even if inflation remains adamant next year.

Read more »

oil and natural gas
Energy Stocks

2 TSX Energy Stocks That Could Break Through the Roof in December 2022

Did you miss the energy rally? Here are two TSX energy stocks that still offer handsome growth potential.

Read more »

TELECOM TOWERS
Dividend Stocks

If I Could Only Buy 1 Stock Before 2023, This Would be it!

If you could buy 1 stock before 2023, what would it be? Here’s the stock I’m considering, and I think…

Read more »

A bull and bear face off.
Stocks for Beginners

3 Stocks to Add During a Market Downturn

There are plenty of options to add during a market downturn. Here are several to considering buying today and holding…

Read more »