Quiz: So You Think You Know Warren Buffett? See if You Can Finish These 10 Quotes

According to Buffett, the secret to getting rich is getting your money to compound for you. The more you have, the better. Preserving your capital is the most important thing. The more money you lose, the bigger the impact it will have on your ability to make money in the future.

Buffett's two top rules of investing are focused on not losing money!

Investing involves a lot of emotions and market psychology. Buffett states that "investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful." Investors are often driven by greed and fear. When others are fearful, they start selling, potentially depressing prices too much. This may present a good investment opportunity. When they are getting greedy, this may mean prices are irrationally high, possibly leading to a bubble. This may be a good time to sell and wait until there is another opportunity to buy!

Buffett's investment strategy revolves around the Benjamin Graham school of value investing. Value investing looks for stocks whose prices are unjustifiably low based on their actual worth. But there's truth in the adage that you often pay for what you get. If a stock is cheap, usually there is a reason. Buffett's states in his 1989 shareholder letter that he had to learn that lesson the hard way. You want to find first-class businesses accompanied by first-class managements that are unappreciated by the market. Focus on wonderful companies, not fair companies.

How do you know if you have a wonderful business? According to Buffett, time will tell. A wonderful business will beat its competitors, grow at a faster rate, and provide a higher return than the market over the long haul.

Here is another indicator of a wonderful company, according to Buffett. If a business is pretty much the only business in town, the company will most likely survive even with weak leadership. Buffett likes to focus on companies that have a good business model that is sustainable over a very long period of time.

Another reason to invest in a wonderful business is that the stock price will follow. If the business beats its competitors and grows at a faster rate, then the stock price will likely provide a higher return than the market over the long run. This is how Buffett has doubled the performance of the S&P 500 since 1965.

In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts, the Depression, a dozen or so recessions and financial panics, oil shocks, a flu epidemic, and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

This is one of Buffett's fundamental concepts of investing. It is important to stay the course. People who pull out of the market when there is a bear market end up losing out on the upturn when it finally comes. By holding investments for a long period of time, you avoid emotional investing and ruining portfolio appreciation for the long run.

Long ago, Ben Graham taught Buffett that, "price is what you pay; value is what you get." Buffett stated in his 2008 annual shareholder report that a decline in the stock market did not bother him and his investment partner Charlie Munger. "Indeed, we enjoy such price declines if we have funds available to increase our positions. Everyone wants a great deal and often the best deals come after a market downturn.