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Warren Buffett’s advice almost never ages poorly. When he offers investment wisdom, many listen to the billionaire, and with good reason — his willingness to share knowledge. One of his many speaking engagements over the past 30 years led to this insightful question (1) from an audience member:
“I was just wondering, what would you consider to be the worst investment you’ve ever made?”
Buffett’s reply was as relevant then as it remains today.
“The worst investment I ever made? The biggest mistakes are the ones that actually don’t show up,” he said. “They’re the mistakes of omission rather than commission.”
He went on to explain that while his company, Berkshire Hathaway, “never lost that much money on any one investment,” his failures came from remaining too cautious when he should have jumped in.
“It’s the things that I knew enough to do that I didn’t do,” Buffett explained. “We have missed profits of as much as you know, maybe 10 billion dollars in things that I knew enough to do, and I didn’t do.”
Here’s what you can learn from Buffett’s (very rare) mistakes.
There are times when remaining cautious is a good idea. When you are new to investing — when you are still learning the game — being careful with your money is essential.
Buffett doesn’t regret any of his active investment choices because, as he noted, his company never really lost much money on the bets he did take. He made wise, thoughtful decisions and perhaps proceeded with more caution than other investors around him.
This strategy served him well, even if it’s possible Buffett could have made more had he taken those larger risks.
Buffett has long advocated investing in reliable, low-risk index funds, such as the S&P 500, for most investors. If you’re early on in your investment journey, or just prefer a low-risk investment strategy, following this risk-averse approach will likely not lead you astray, barring a complete market collapse.
After all, the average investor’s heart may sink watching the rollercoaster ride that high-risk investments like bitcoin can take your money on. You never want to put yourself in a position where you feel forced to sell off investments just because they take a dip.
If you can relate to that urge, sticking with Buffett’s slow and steady, highly diversified investment strategy is better than enduring the psychological ups and downs that high-risk investing could put you through.
Platforms like Acorns can help you do just that by investing your spare change in highly diversified ETFs.
It’s simple — purchase a coffee for $4.25, and Acorns will round up the price to $5.00 and invest that extra 75 cents. Throughout the year, all this extra change on your daily purchases could snowball into a sizable investment.
Set up a monthly recurring deposit today, and you can get a $20 bonus investment to kickstart your investment journey.
Read more: Warren Buffett used 8 solid, repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
On the other hand, once you’ve reached a certain level of investment, you might feel more comfortable taking on those bigger risks.
Buffett’s only mistakes came from not taking on more risk when he certainly had the capital and the investment knowledge to withstand any single investment failure.
The key lesson here is that you should thoroughly understand the fine print of the market before you consider these riskier investments. But getting to that point by yourself can take a lot of time and effort.
If you’re looking to get a handle on the investment landscape quickly, it could help to gather as much information as possible from reliable sources.
One option is Moby, which can help you do just that by researching the best companies to invest in and accurately summarizing the findings for you.
The platform provides tailored, data-driven insights via three hand-picked investment opportunities delivered weekly straight to you.
Moby’s technology also integrates seamlessly with your favorite financial tools, providing accurate recommendations, analysis and financial planning assistance — and they even offer a 30-day money-back guarantee.
A notable omission Buffett makes is the real estate market.
When asked at a recent Berkshire Hathaway meeting why he still buys stocks instead of property, Buffett made his position clear:
“There’s just so much more opportunity, at least in the United States, that presents itself in the security market than in real estate (2).”
He clarified that real estate investing demands a lot more of your time and energy than stock investing, making it unappealing to anyone who doesn’t want a second job.
While that is true, there are new ways to invest in real estate that make getting into this inflation-resistant market much easier.
If you’re interested in diversifying into real estate, but like Buffett, prefer to avoid the time suck, Arrived can help. Backed by world-class investors like Jeff Bezos, Arrived lets you invest in shares of vacation and rental properties quickly.
Just browse their selection of properties, already vetted for appreciation and income generation potential, to get started. When you find a property you love, you can invest in it for as little as $100 to test the waters and see if Arrived is right for you.
Arrived also offers a secondary market for selling your shares, with the full rollout of properties coming soon.
While you might wish you had Buffett as your own personal advisor, he’s spent the majority of his career freely sharing his wisdom — so you don’t have to look too far to learn from the greatest investor of all time.
That said, the worst mistake an investor can make is investing in something they don’t understand. If you’re not sure about the best path forward for your investments, you might benefit from working with a qualified advisor who understands your particular situation.
If you’re not sure where to find one, consider Advisor.com. All you have to do is answer a few quick questions, and you’ll be matched with a selection of the best potential advisors for your needs.
Book a no-obligation call with your favorite picks to find the right advisor for you.
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Investingbasicsyt (1), CNBC (2)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.