Blogs > Your Money

Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Friday, September 24, 2010

Words of Wisdom from Warren

We like money quotes from famous people and often include them in our client newsletters. Most people know who Warren Buffett is and we often quote one of many of his quotes: Rule # 1 is: Never lose money and Rule # 2 is: Don’t Forget Rule # 1.

In case you aren’t quite sure of who Warren is; he is one of the wealthiest people in the world who learned about investing and started investing at a very early age. In college, he studied under the famed investor Benjamin Graham who wrote the classic book on investing titled “The Intelligent Investor”. Using what he learned from Graham, Warren started his own investment firm, now known as Berkshire Hathaway.

Warren is now worth billions of dollars and plans to leave the vast majority of his assets to charity, when he passes on. He has become close friends with Bill Gates and made headline news in June, 2006, when he announced that he would join forces with Gates by leaving the majority of his fortune to the Bill and Melinda Gates Foundation... Recently Warren and Bill Gates secured the pledges of numerous other billionaires to leave at least 50% of their fortunes to charity.

Warren’s quote reminds us of the importance of protecting our principle when investing. Too often, investors look only for investment return, often chasing the latest hot investments. They overlook the fact that high returns bring high risk. Steady growth over time is what is really important. Losses are difficult to make up. A 10% loss requires and 11% gain to get back to where you were. A 25 percent loss requires a 33 percent gain and a 50% loss requires a 100% gain, just to break even.

We believe that many of these money quotes help teach a lesson often overlooked by investors. We plan to include more of these “Words of Wisdom” in our blog and hope you enjoy them.


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