4 Legendary Investors' Advice for Beginners

You can learn a lot from the investors who have already cracked the billionaire code.

Obviously, if it were easy to become a billionaire by investing in the stock market, everyone would do it. But it's not. Fortunately, several investors have decided to share the lifetime of wisdom they learned during their legendary careers. Here are some of the highlights beginners should know, plus some in-depth suggestions to build your investment knowledge through the wisdom of the experts.

Warren Buffett: The ultimate buy-and-hold investor

To be sure, it is difficult to choose just a few pieces of advice from legendary billionaire Warren Buffett. The "Oracle of Omaha" has written a letter to shareholders every year, full of investing insight and has given countless interviews with more of the same.

Some of Buffett's best advice addresses some of the most common mistakes new investors make -- specifically, speculating and over-trading.

On the topic of speculating, it can be very tempting to look at a stock that has plunged by 80%, 90% or more, trading for just a few cents per share, and be tempted to buy as much as possible while it's down. But as Buffett says, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." In other words, some stocks are cheap for a reason.

Second, far too many investors believe the best way to create wealth is to continually move in and out of stock positions. But Buffett is living proof that having a long-term mentality is the way to go. "All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies,” Buffett has said.

Peter Lynch: Invest in what you know, and stay the course

Peter Lynch is the most successful mutual fund manager of all time, and has written several books detailing the advantages retail investors have over Wall Street pros. But one thing he emphasizes is how important it is for investors to prepare for market plunges like we've seen in 2022.

"People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game," Lynch says. In short, market drops are a scary, but normal part of investing in the stock market -- not a reason to panic.

Charlie Munger: 98 years of absorbing knowledge

Charlie Munger has been Warren Buffett's business partner for decades and will turn 99 years old on New Years' Day. And one thing many newer investors are surprised to learn is that he and Buffett spend the vast majority of their time simply reading as much as they possibly can. Both look at accumulated knowledge as their top competitive advantage as investors, and it's difficult to argue with their track records. "Live within your income and save so that you can invest. Learn what you need to learn," Munger has said.

Jack Bogle: The father of the index fund

Vanguard founder Jack Bogle revolutionized investing for everyday Americans more than any no-commission trading apps or discount brokerages have. He is widely credited with inventing the index fund, a low-cost investment vehicle designed to match the performance of a certain index (like the S&P 500) over time. Today, trillions of dollars are invested in index funds.

The way Bogle sees it, investment fees are not only a major cost, but are completely unnecessary. Most mutual fund managers don't beat the overall market, and also charge fees that are many times what passive index funds charge. As Bogle put it, "The miracle of compounding returns is overwhelmed by the tyranny of compounding costs."

In other words, while a 1% annual fee (expense ratio) on a fund might not seem like a large amount, it could rob you of thousands of dollars in gains over the long term. Always be aware of the fees you're paying and take practical steps to make sure yours are low.

Learn from the all-time greats

Obviously, there is a lot more to learn from these four legends than I can discuss in a 700-word article. These investors have shared a ton of extremely valuable knowledge that every investor should read. Check out all of Warren Buffett's letters to Berkshire Hathaway shareholders. Read One Up on Wall Street and Learn to Earn by Peter Lynch. Check out The Little Book of Common Sense Investing by Bogle. And there's a great collection of Munger-isms available in the book Poor Charlie's Almanac. If you read all of these, and continue to grow your knowledge over time, you'll be in a great position to make better decisions in your own portfolio.