Buffett's Words Of Wisdom

On May 7, 2012, CNBC conducted a wide-ranging interview with legendary investor Warren Buffett.  Below are 5 brief excerpts from that interview.  (Glad to see he agrees with me!)

BUFFETT ON CASH:  “I think cash is probably as risky an asset as you can own over time.  You're not taking risk off when you go into cash.  You are going into something that is sure to decline in purchasing power over time.  So that is the biggest risk I know is to own cash.”

BUFFETT ON HYPE:  “Retail investors should not pay any attention to the day's news.  If they're paying attention to the day's news and they're trying to buy and sell stocks based on the day's news, they're never going to be successful investors.  The idea is to buy a good business.  I mean, it's the same way as if you went out to buy a business.  You'd look around for a company, some little business that had good prospects over time, had decent and honest management and where the price made sense.”

BUFFETT ON STOCKS:  “I think equities are very attractive for the long term.  And they may get more attractive next week or next month.  But it's the same thing I said in October of 2008.  I didn't know where bottoms were going to be or where they were going to be in a year.  But equities, good producing businesses are a great thing to own over time, and they will be a great thing to own for the next 100 years.  But who knows whether they go up or down in price next week.”

BUFFETT ON TRADING:  “I'm not a fan of active trading of any kind.  I don't know how to make money trading actively.  Maybe if I did, I wouldn't be so negative on it.  As to the volume, though, there's still way too much volume in the market.  I mean, the idea that the ownership of a company should turn over a hundred percent in a year, that is not the way people behave with apartment houses, it's not the way they behave with farmland.  But they have this notion in stocks that they ought to do something every day.  The best thing to do with stock is buy stock with a good company and don't look at the price for five years or something.”

BUFFETT ON WHAT TO BUY:  “The greatest asset to own is your own abilities. I mean, no matter what happens in the economy or with currency, if you develop your own talents – I tell the college students that the best thing to have is to develop your own talents.  The second best thing is to buy into other people's talents.  You know, here's Coca-Cola, and people are going to be drinking it 10 years or 50 years from now, and they're going to be drinking more of it, and they'll make more money.  So I don't have any idea what Coca-Cola stock is going to do next week or next month or next year, but I'm pretty darn sure where the company will be in 10 or 20 years.  And people beat themselves in the stock market.  The stock market, literally, in the 20th century, went from 66 on the Dow to 11,400.  And you'd said, `How could anybody not have a good experience?'  But millions of people don't because they get excited at the wrong time, and they get depressed at the wrong time.  So you've got to put your emotions aside, you've got to give up the idea that you can decide when to buy stocks and when to sell stocks.  The time to buy stocks is consistently over time.”