The wisdom of learning from your mistakes and more.

A while ago, I shared some of my favourite Warren Buffett quotes and explained how they apply to investing. Essentially, he discusses his philosophy on how to buy low and sell high, invest for the long term and get advice. The “Oracle of Omaha” has a lot of wisdom to impart, so I’ve decided to share a few more of his quotes with you.

When a company’s stock price is going up and up, you might get the impression that the company is doing well. You may feel that it’s time to jump on board since you don’t want to miss out on a good thing. But stop and think about Mr. Buffett’s advice for a minute.

Stock prices are determined by how much investors are willing to pay, not necessarily by how much a company’s stock is actually worth. When evaluating potential investments, portfolio managers and analysts look at a company’s financial strength, competitive positioning and growth outlook (amongst other things) to try to determine current and potential value. 

Remember when stock markets plunged in 2008-09? A lot of investors got scared. They were losing money and didn’t want to lose more, so they got out of the market entirely. The problem is, some investors stayed out for a long time, so they weren’t invested when we entered one of the longest bull markets in history. They may have avoided some losses, but they also missed out on the significant gains that followed.

It takes discipline and conviction to stay invested when others are selling out of panic. However, history shows that investors who stay the course through short-term market downturns typically experience the strongest growth in wealth over the long term.

Mr. Buffett is known as one of the greatest investors of all time, so of course a lot of his advice has to do with buying and selling the right stocks at the right time.

But focusing on doing a few things right is good advice that applies to more than choosing stocks. It equally applies to creating and sticking with your financial plan. Here are some of the things you want to do right: invest according to your financial goals, invest in a diversified portfolio and keep your eye on the long term, which means staying invested even when markets are down.