Legendary investor Warren Buffett recently conducted a lengthy shareholder Q&A session at Berkshire Hathaway's (BRK.A 0.55%)(BRK.B 0.55%) 2025 annual meeting. As per usual, he had some interesting things to say for investors.
Of course, Buffett spoke for several hours at the meeting, so these aren't the only three notable things he discussed. But here are three particularly important Buffett quotes from his last shareholder meeting as CEO that have some excellent lessons for investors.
Image source: The Motley Fool.
The importance of a strong balance sheet
All publicly traded companies issue three financial statements on a quarterly basis: the income statement, balance sheet, and cash-flow statement. Many investors, including Wall Street experts, tend to pay the most attention to the income statement, and for obvious reasons. After all, you want to see how much a business is earning, how quickly its sales are growing, and other income-related metrics.
On the other hand, Warren Buffett revealed that he spends more time evaluating balance sheets than income statements:
Wall Street doesn't pay much attention to balance sheets, but I like to look at balance sheets over an 8- or 10-year period before I even look at the income account because there are certain things it's harder to hide or play games with on the balance sheet than with the income statement.
In short, there's a lot of accounting rules and tricks that are used in income statements that can distort the numbers. For example, there are a few things in the standard net income calculation, such as depreciation, that can make it not necessarily reflective of how much money a company is truly earning.
On the other hand, metrics on a balance sheet -- debt, cash and equivalents, receivables, and more -- are comparatively straightforward.
There's nothing wrong with passive investing
As Buffett said at the meeting in response to a question about Berkshire's massive cash stockpile:
We don't think it's improper for passive investors to make a few simple investments and sit with them for life. But we've made the decision to be in the business, so we think we can do a little better by behaving in a very irregular manner.
In other words, Buffett believes it's possible to outperform the stock market over time by being patient, selective, and analytical about building an investment portfolio. In this context, he was explaining why he's in no rush to deploy Berkshire's capital, preferring to wait until truly attractive opportunities come along.
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Key Data Points
On the other hand, Buffett has said before that the best investment most people can make is a simple, low-cost S&P 500 index fund. This has historically produced returns of about 10% annually over the long run and can be quite an effective wealth builder.
Buffett has been outspoken about the power of passive index fund investing, previously saying that a statue should be built honoring Vanguard founder Jack Bogle for bringing low-cost indexing to everyday investors.
There's no need to swing for the fences
There have been some big investment trends that have taken place in the past few decades. A few people made money, but most people who got involved ended up losing most or all their investment. Things like the mortgage-backed securities bubble that led to the financial crisis, the SPAC boom in the 2020 to 2021 time frame, and the meme coin craze around the same time.
Buffett offered some advice when it came to taking unnecessary risks after saying that "the big thing you have to do is always be sure you can play the next day." He cautioned investors:
If very stupid things are happening around you, you do not want to participate. If people are making more money because they're borrowing money or participating in securities that are pieces of junk but they hope to find a bigger sucker later on, you have to forget that. That'll bite you at some point.
The fact that Warren Buffett managed to produce roughly 5.5 million percent gains during 60 years at the helm of Berkshire Hathaway isn't the most remarkable thing about his story. It's that he did it by largely following a buy-and-hold investment strategy and without ever swinging for the fences or chasing the next big thing.
