Swimming Naked, Investing in Bricks and Other Warren Buffett Words of Wisdom

This week, billionaire investor Warren Buffett announced that he will no longer be writing Berkshire Hathaway’s annual letters. The documents — available online, simple yet comprehensive, scoured by disciples of the man known as the “Oracle of Omaha” — contain troves of financial insights for investors.

Buffett’s letters date back decades. To find some of the best nuggets of wisdom for you, I called a half-dozen financial advisers across the country for their favorite quotes. Here’s what they said, and why each adviser thinks the insights remain relevant today:

“You only find out who is swimming naked when the tide goes out.” (2001)

Lindsey Young, founder of Quiet Wealth in Baltimore, Maryland:
Buffett’s first instinct is always to ask what could go wrong with an investment, not what could go right, and his investment approach embraced several classic risk management techniques.
First, he always maintained a highly diversified portfolio across a range of industries. Second, he usually chose investments where there was a “margin of safety,” so if something did go wrong with an investment, losses would likely be limited. In addition, Buffett always maintained a lot of cash on Berkshire Hathaway’s balance sheet to buffer against market risks. Finally, when valuations became unattractive, Buffett simply let the cash stockpile build up rather than chase the market.
This risk management-focused approach meant that Buffett was never naked when the tide went out, allowing Berkshire Hathaway to take advantage of unique investment opportunities during market panics. In today’s bull market environment, individual investors are often tempted to grow their allocations of risky investments, but remembering Buffett’s emphasis on risk management is likely to lead to better risk-adjusted returns and assuredly will provide more peace of mind.

“It pays to be active, interested and open-minded, but it does not pay to be in a hurry.” (1992)

Kristy Jiayi Xu, founder of Global Wealth Harbor in Danville, California:
At first glance, this quote seems overly simple. But after years in the industry, I’ve come to appreciate its wisdom in a way that I could not when I first read it. To me, being “active” means continually and proactively researching and identifying high-quality investment opportunities to improve portfolio performance. Being “interested” means really taking the time to understand different aspects of the investment in depth. Being “open-minded” means willing to adjust existing investment approaches or philosophy as the investment environment or situation evolves. And not being “in a hurry” is to resist the temptation to chase recent performance or make emotional, reactionary decisions based on short-term news. Those are all basic but extremely important qualities required for successful long-term investing.

“Beware the investment activity that produces applause; the great moves are usually greeted by yawns.” (2008)

Jeff DeLarme, president of DeLarme Wealth Management in Palos Verdes Estates, California:
While many of the hottest investments (SPACs, 0 DTE options, single stock ETFs, levered strategies, etc.) might have merit, I find a more “boring’” investment approach still produces respectable results without as much heartburn. For many of the clients I work with, it’s not about the highest possible returns or the latest fad, it’s more about building and maintaining a portfolio that we can stick with through good times and bad.

“Anything can happen anytime in markets. And no adviser, economist, or TV commentator — and definitely not Charlie [Munger] nor I — can tell you when chaos will occur. Market forecasters will fill your ear but will never fill your wallet.” (2014)

Mike Hunsberger, Owner of Next Mission Financial Planning in St Charles, Missouri:
To me, this means there is a lot of noise out there. We’re storytelling creatures. We like to know why or what’s going to happen next. But really with markets, nobody knows. So you need to be prepared for that. Over the long term, markets have typically gone up, even though that’s not really guaranteed. Over the shorter term, things can be much more volatile. Having a long-term focus and diversifying – not just investing in whatever’s been hot lately, like the AI or Mag 7 stocks, is important. That can mean still having international exposure, small cap or value exposure.

“I will tell you now that we have embraced the 21st century by entering such cutting-edge industries as brick, carpet, insulation and paint. Try to control your excitement.” (2000)

Charles Thomas III, Founder of Intrepid Eagle Finance in Clover, South Carolina:
Context is always important. This letter came out on the heels of several years of dot-com mania. Everyone was talking about the death of value investing. There were people writing Buffett’s professional obituary. At the point this letter came out, it was becoming clear the dot-com bubble was bursting. A lot of people in Buffett’s shoes would have gone out and got some revenge, talking about how he was right all along. He doesn’t do that here. Instead, he uses his usual dry wit to talk about his strategy in contrast to everyone else, looking for underappreciated businesses that produced consistent cash flow. This quote is important today because it’s a reminder that it’s really hard to predict where bubbles and froth in the markets are going to come up, especially in the middle of them.

“We can afford to lose money — even a lot of money. But we can’t afford to lose reputation — even a shred of reputation.” (2010)

Brian Canning, Founder of Brave New Wealth in Westlake Village, California:
When you think about trust, that is the one thing that interweaves all businesses. It’s something that you work towards slowly year after year. Losing that trust can instantly destroy any business. Revenue can recover. You can spend money, and you can make mistakes every now and then. But credibility doesn’t recover. If you try to optimize for the thing that compounds forever, it’s trust.

I’m no oracle, but something tells me incorporating even a few of these points into your financial life could set you up for success.