Buffett’s words of wisdom

Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.
The secret to getting rich: Compound returns. And the more money you have to begin with, the more it will compound. So taking risks with your money when you're young might not be the best strategy.

You should invest like a Catholic marries--for life.
If you view an investment as a lifelong commitment, you'll be more likely to do your homework before taking the plunge. The rewards can be huge; Buffett invested $11 million in the Washington Post Co. in 1973, and today his stake has grown to be worth $1.5 billion.

I don't try to jump over 7-foot bars; I look around for 1-foot bars that I can step over.
Buffett isn't shooting for the stars. He isn't trying to hit home runs on every pitch. He is waiting for the perfect pitch, the sure thing: Companies with business plans he understands, that sell products that won't go out of style.

My idea of a group decision is to look in the mirror.
Buffett doesn't seek affirmation from others; he prefers to go against the herd. He has often bought into companies when no one else wanted them: General Foods, RJR Tobacco, GEICO, American Express.

Invest in a business that even a fool can run, because someday a fool will.
There are businesses with great underlying economics, and businesses with poor underlying economics. You want to invest in the former, because they are hard to damage.

The most important thing to do if you find yourself in a hole is to stop digging.
If you find you're in a bad investment, stop throwing money at it. Though it's painful to pull out, in the end it is far more profitable.

If at first you do succeed, quit trying.
Buffett has always searched for excellent businesses to buy, and then once he bought them, he has held on to them, watching the stock prices grow along with the earnings. Once you make a good investment, it's better to keep it instead of selling for a modest profit and moving on.

I want to be able to explain my mistakes. This means I do only the things I completely understand.
If you don't understand what you are doing, then why are you doing it? The proper investment approach is not intuitive--it is rational.

If they need my help to manage the enterprise, we are probably both in trouble.
Just because you're a great investor, that doesn't mean you're a skilled business manager. Recognizing talent is different from having talent. Know your own abilities, and exploit them, but don't overreach.

If we can't find things within our circle of competence, we don't expand the circle. We wait.
If a company is within Buffett's circle of competence, he might buy it--but only if it is selling at the right price. If it isn't within his circle, he won't even look at it. And if he can't find an investment he understands that is selling at the right price, he will wait. And wait.