Depth! Legendary stock god Buffett takes a bow, these eight wise sayings you must hear!

At the age of 95, Buffett stated in his Thanksgiving letter to shareholders that he will step down as CEO of Berkshire at the end of the year, marking a spectacular farewell for a legendary investment guru.

What can ordinary people learn from someone who became the world's richest person by trading stocks?

Let's first take a look at how the "God of Stocks" Buffett was formed?

In fact, Buffett was born into an ordinary family like most of us, and as a child, he did odd jobs like delivering newspapers and picking up golf balls. However, Buffett was obsessed with investing in stocks from a young age and bought his first stock at the age of 11, having already earned enough money for his tuition before going to college.

After entering Columbia University, I studied under Graham, the author of "The Intelligent Investor," and eagerly learned about investing.

At the age of 25, he established his own investment company. Over the course of ten years, the cumulative return skyrocketed 11 times, gaining fame in one fell swoop.

A stock market guru is not made in a day. Buffett's investment philosophy underwent two key evolutions.

In the early days, he fully adhered to Graham's "cigar butt" strategy, specifically targeting cheap companies whose prices were below their tangible assets. Acquiring Berkshire Textile was itself a product of this thinking, but it also came at a significant cost.

What truly took him from "excellent" to "great" was his partner Charlie Munger, who accompanied him throughout his life, both as a mentor and a friend. Munger made him realize that "buying a remarkable company at a fair price is far better than buying a mediocre company at a low price."

What does it mean? It means that instead of buying "cheap goods," it is better to buy "excellent companies" at reasonable prices. Investing in American Express in 1964 was a classic turning point. At that time, the company's price-to-earnings ratio was not low, but what Buffett valued was its strong brand "moat" in the credit card field. He decisively placed a comprehensive bet and ultimately made a fortune.

As he summarized himself in 1985: "Graham tended to look at the statistics in isolation, while I increasingly value those intangible things."

From then on, a mature investment philosophy was completely formed. Coca-Cola, Hershey's, Gillette razors, Apple Inc... these classic investments all valued the business model and moats of the companies themselves.

During the 2008 financial crisis, he decisively invested in Goldman Sachs; in 2020, amid the pandemic impact, he calmly liquidated airline stocks. In recent years, he has bet $20 billion on the five major trading companies in Japan.

What is most remarkable is that, despite experiencing several financial crises, Buffett's investment portfolio has almost never recorded an annual loss. For more than sixty years, the annualized return has been close to 20%, consistently outperforming the market.

Through a long-term commitment to value investing and the "snowball" effect of compound interest, Buffett transformed from a poor kid into the world's richest man, a legendary stock god.

Buffett teaches us not only investment methods, but also life philosophy and wisdom. I have summarized the 9 most essential points for everyone; learning any one of them can benefit you for a lifetime.

Article 1: Do not pay attention to short-term market fluctuations.

"Stock prices are like a dog walking with its owner; the dog may run ahead of the owner for a while and then fall behind, but ultimately it will return to its owner's side." This means that the market may deviate from intrinsic value in the short term, but it will eventually revert to value. The lesson for us is not to worry too much about short-term market fluctuations, but to focus on research of the company's fundamentals and intrinsic value.

Article 2: Buying stocks means buying a company. Understanding the company's moat is the core of value investing.

Warren Buffett has a famous saying: "If you don't want to hold a stock for ten years, you shouldn't hold it for even a day." Why? Because, in his view, buying stocks means buying the company itself. You need to understand the business model, unique value, and competitive moat of the company. Otherwise, if you can't figure these out, it's gambling, and you're bound to lose nine out of ten times. This is the mistake that most people make.

What kind of company is truly worth investing in? The answer lies in his "moat" theory. He compares good companies to a castle, where the real core competitiveness is the "moat" that is deep and wide outside the castle, ideally filled with crocodiles and piranhas, making it so that competitors do not dare to approach.

This moat is the company's monopolistic advantage. For example: an unbeatable brand; unique technology or products; a business model that is hard to replicate; government concessions. With these, the company can avoid vicious competition and make steady profits.

Article 3: The compounding of long-termism, gradually becoming rich

Someone once asked Buffett a question, "Your investment philosophy is very simple, why doesn’t everyone just copy your approach?" Buffett replied, "Because no one is willing to get rich slowly."

This sentence reveals the weaknesses of human nature. Earning 20% in a year is not difficult; the challenge is achieving 20% year after year. Buffett's most important strategy is "buy and hold"; Coca-Cola has been held for 37 years without reduction, and American Express was first purchased in 1964, with a holding period of over 60 years. BYD has also been held for 14 years. This tells us that patience is more important than intelligence; great stocks are cultivated over time, and frequent trading is often the fastest way for ordinary people to lose money.

Article 4: Investing is like rolling a snowball; the key is to find a long slope with thick snow.

What common characteristics do the companies heavily invested in by Buffett share? They have a large market scale, can sustain profits, have low debt, and a simple business model; they represent a long and steady path. By finding such a path, your wealth snowball can grow bigger and bigger.

The national economy has hundreds of industries and tens of thousands of listed companies, which can be classified into three types: hard work without profit, earning a meager profit from hard work, and making a profit without hard work.

If you take a closer look at Coca-Cola, its ingredients are nothing but water and syrup, yet it sells all over the world; the business models of Hershey's candies and Gillette razor blades are also very simple, all belonging to the "easy money" industry. They all have three characteristics: mass appeal, necessity, and high frequency. Everyone needs them, the consumption frequency is high, and their own operating cash flow is continuous.

Article 5: Adhere to the "circle of competence"; do not touch what you do not understand.

Warren Buffett never invests in companies he doesn't understand. The first rule of investing is to avoid losing money, especially to avoid investments that carry the risk of principal loss. It's important to know what you know, and even more importantly, to know what you don't know. Act within the circle of your own competence and avoid stepping into pitfalls across different fields.

Buffett's success lies not only in how many correct decisions he made, but also in how he turned down thousands of temptations for those few key correct decisions. A person's energy is limited, and it is impossible to understand everything. If there are no good opportunities, it is better to hold cash than to invest recklessly, otherwise it is just gambling.

Article 6: Reverse thinking, when others are fearful, I am greedy; when others are greedy, I am fearful.

This is a famous quote from Buffett. On "Black Monday" in 1987, the US stock market lost 500 billion in a single day, and Buffett personally lost as much as 342 million dollars. However, unlike most panicking retail investors, while the market was still in mourning, he boldly invested 1 billion dollars, making a large acquisition of Coca-Cola at a price-to-earnings ratio of 15 times, and continued to increase his position. This investment brought him an astonishing return of "ten times in ten years."

Article 7: Cherish your reputation; it is more valuable than wealth.

Warren Buffett values "integrity, intelligence, and energy" the most when it comes to people, with integrity being the top priority. He said: "It takes 20 years to build a reputation, and 5 minutes to ruin it."

The widely recognized reputation of Buffett makes him very popular in the mergers and acquisitions circle. Berkshire has always practiced "giving acquired companies a forever home" and never engages in hostile takeovers, which greatly reduces the resistance in merger negotiations due to this long-term reputation.

Article 8: Investing in yourself is the best business.

Warren Buffett said: The best investment a person can make is in themselves. Interest should always come first; wealth follows interest, not the other way around. No one can take away what is within you. Spend your money and time on improving your skills and knowledge; the return on this asset is limitless. He has proven throughout his life that true success lies not in the accumulation of wealth, but in choosing the right partners, sticking to the work you love, and maintaining a joyful learning attitude.

Greatness is not money, fame, or power, but rather good deeds; kindness is priceless.

In his farewell letter, Buffett expressed this profound statement. Buffett not only tells us how to make money, but also how to use wealth wisely. He admits that he is lucky, as there are still many places in the world with a huge wealth gap, and many people live in poverty. Investing is for a better life, and the highest realm of life is to use the resources you have to make the world a better place. As our old saying goes, virtue carries wealth; only character can bear wealth.

Although the legendary stock god of the first generation has taken his bow, Buffett's wisdom will continue to shine and illuminate our investment journey.