Warren Buffett investment advice is always valuable. After all, he’s still running one of the most successful companies in the world at age 91. What sometimes gets overlooked is how generous the man is.
He’s the man behind the largest charitable donation of all time, his monumental $31 billion donation to the Bill & Melinda Gates Foundation in 2006. He also got some ink recently from a charitable donation of $4.1 billion as part of his Giving Pledge campaign to donate the majority of his net worth. Clearly Warren’s game is different from the one most of us are playing.
But one aspect of the 2006 story that we especially liked was the reaction of Buffett’s children and grandchildren. Warren has said that he doesn’t believe in dynastic fortunes, but the amazing thing is that his progeny don’t seem to believe in it either. In an interview with National Public Radio in 2006, Nicole Buffett (one of Warren’s granddaughters who’s an artist in San Francisco) talked about how proud she was of him and how her family was raised to basically ignore Warren’s billions and just get on with making a living for themselves.
Wise Words from Warren Buffett’s Wife
Late in the interview Nicole Buffett talked about five sayings that her grandmother, Warren’s wife, used to drill into her kids and grandkids. They’re pretty basic, which is what you’d expect from a down-to-earth value-investing family, but they’re also pretty good.
- Show up.
- Tell the truth.
- Pay attention.
- Do your best.
- Don’t be too attached to the outcome.
Now, the first four are exactly the kind of sentiments you’d expect to find embroidered on satin pillow in your grandmother’s house. But number five is a more profound and unexpected piece of advice, and a great lesson for all investors.
Investing, especially growth investing, always requires a leap of faith. You can do all your homework on a stock, check the fundamentals, analyze the chart, read the coverage from analysts and commentators (and newsletters like ours), and calculate its potential for hours on end. But eventually you have to make the decision to push the buy button. And then the fun begins.
We know from the questions from subscribers we receive here at Cabot that some investors follow the progress of their stocks with an interest that borders on obsession. For some people, having a stock that goes down can ruin their entire day, in the same way that others are buoyed or bummed by what the bathroom scales tell them in the morning.
The problem is, that doesn’t make them better investors. We know that some of the stocks we recommend will curl up and die like cut flowers. We don’t like it, but experience has taught us this over and over. And we can state categorically that if you can’t tolerate buying stocks and then selling them when they turn up their toes, you may not have what it takes to be a growth investor. As Warren Buffett’s wife would say, you’re too attached to the outcome.
Obviously, we’re not suggesting that you shouldn’t care about making money. But being too attached, despairing every time one of your stocks takes a dive, can only hurt you as an investor. It will make you too reluctant to jump into stocks that seem like less than a sure thing. And it can also cause you to hold onto losers longer than you should because you don’t want to finally admit that they’re not going to be the huge winners you’d hoped for.
The lesson is to keep your investments, especially your growth stocks, in perspective. Picking winners doesn’t make anyone a better person. And getting tagged with a few losers is all part of the game. It’s the process that counts—cutting losses short, letting winners run and staying in sync with the market.
People have sworn by Warren Buffett investment advice for years. But we think listening to what his wife had to teach can also be helpful.
Which of those pieces of advice resonate most strongly with you?
*This post has been updated from a version published in 2017.