4. Don't fear market crashes and corrections
The obvious goal of stock investing is to buy low and sell high, but human nature can compel us to do the exact opposite. When we see our friends and colleagues making money, we feel like we should try to make money, too. We are tempted to invest our money in stocks. And when stock markets crash, it's our nature to wait it out on the sidelines. So, it's tempting to sell "before things get any worse."
Buffett loves it when stock prices drop since it creates opportunities to buy at a discount. This is why Buffett was extremely active in the stock market in the years immediately following the 2008–09 financial crisis.
Buffett takes advantage of discounts on his favorite stocks. As he says, "Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble."
5. Approach your investments with a long-term mindset
One of the most important Warren Buffett quotes on investing is, "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes."
He doesn't choose stocks just because he thinks their prices will rise this week, this month, or even this year. Buffett buys stocks because he wants to own those businesses long-term. To be clear, in practice, Buffett sells stocks frequently, but he approaches most of his investments with the mindset of holding them for the long run.
You also can't adopt a "forever" mentality with stocks. Buffett argues that one of the best investments most people can make is a set-it-and-forget-it investment, such as an S&P 500 index fund.
6. Don't be afraid to sell if the scenario changes
A famous Warren Buffett quote, from when he was asked about an investment he decided to sell at a loss, is: "The most important thing to do if you find yourself in a hole is to stop digging."
While he certainly wants to own every stock he buys forever, the reality is that outlooks change.
Here's a great example: Buffett bought a large position in mortgage agency Freddie Mac (FMCC -4.44%) a couple of decades ago. A few years before the 2008–09 financial crisis, he noticed that the lender's management had started taking unnecessary risks with the company's capital and decided to sell. When the financial crisis hit, it became clear that Buffett had made a smart move.
7. Learn the basics of value investing
Warren Buffett is widely regarded as the world's greatest value investor. Value investing prioritizes paying low prices for investments relative to their intrinsic values. A value investor's goal is essentially to buy $100 worth of a company's stock for less than $100 -- ideally, much less.
Value investors seek out and invest in companies with intrinsic values well above the enterprise values implied by their stock prices. Value investors, such as Buffett, expect the market to eventually recognize the full value of an undervalued company, resulting in an increase in the company's stock price and a profit for the value investor.
8. Understand compounding
Warren Buffett is perhaps the best example of the power of long-term compounding.
Buffett uses compound interest, dividend reinvestment, and the power of constantly reinvesting the operating cash flow generated by Berkshire's businesses to his advantage. How powerful is this? Berkshire Hathaway (BRK.A -1.50%) (BRK.B -1.52%) has averaged a 19.7% annualized return from the time Buffett took over in 1964 through the end of 2025, compared with 10.5% for the S&P 500.
