Many people assume that building wealth requires complex formulas, an insider approach, or a relentless pursuit of the next big opportunity. But one of the world’s most successful investors, Warren Buffett, has long argued that the basis of financial success is surprisingly simple.
Buffett, who is the chairman and former CEO of the Berkshire Hathaway conglomerate. consistently advises investors to maintain patience, discipline and rational thinking in making decisions to achieve investment goals. Although these principles sound straightforward, practicing them requires unusual consistency.
In one such piece of advice, an ace investor said, “I’ll tell you the secret to getting rich on Wall Street. You try to be greedy when others are fearful. And you try to be fearful when others are greedy.”
What does this mean?
The first part of his “Close the door” advice is about creating the right mindset. It means that an investor should always cut out noise like constant news updates, friends’ opinions and market hype. The best possible way for a person to make clear and independent decisions is to block out the crowd and focus on their own judgment.
When Buffett advised investors to “try to be greedy when others are afraid,” he was pointing to a strategy that can be deployed during periods of market panic.
Prices fall because people get scared and sell. But fear can push stocks below their true value. Buffett’s point is that these moments can create opportunities. If strong companies are temporarily undervalued due to panic, that’s when disciplined investors step in and buy.
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He also advised people to “be afraid when others are greedy.”
By this he means that when markets rise, people become overconfident. Prices are rising rapidly, sometimes beyond what the fundamentals justify. Investors follow trends, ignore risks and assume that prices will continue to rise.
Buffett warns that this is when caution is needed. If everyone rushes the crowd, assets may be overpriced and a correction may follow. In short, Buffett advised people not to get carried away in bubbles and succumb to herd mentality.
Who is Warren Buffet?
Warren Buffett, along with his friend and business partner Charlie Munger, was a legendary investor who turned Berkshire Hathaway into a billion-dollar empire over nearly 60 years. He is an American investor and philanthropist who is popular for his timely and strategic bets on the stock markets.
In January of this year, Buffett handed over the reins and the position of CEO to successor Greg Abel. But his “bull run” with Berkshire is legendary, delivering returns of more than 55,00,000% over 60 years (1964-2024), building the group to $1.2 trillion and expanding its Class A shares to a value of $167 billion.
Known as the ‘Oracle of Omaha’ for his timely stock predictions, Buffett gained fame and investor confidence by picking companies (Apple, Bank of America, Coca-Cola, etc.) that exploded and now make up 70% of Berkshire’s $263 billion stock portfolio. He called it how “one great deal can balance out the many mediocre decisions that are inevitable”.
Buffett’s net worth is estimated at $152 billion, making him the 10th richest person in the world, according to the Bloomberg Billionaire Index.
