We recently posted a blog titled “Words of Wisdom from Warren”. We like financial quotes of all types, especially those from famous investors or well-known people. Warren Buffet, known as one of the savviest investors of all time, is often quoted for his thoughtful words of wisdom.

This is the second of our “Words of Wisdom from ……..”. that we will post from time to time. It’s unlikely the quotes will focus on something we haven’t written about previously. Many however, will give us the opportunity to re-emphasize an important concept.

Warren’s quote today is attributed to his “oft-repeated response when asked why he doesn’t invest in high-tech stocks”, as noted in The Quotable Investor (The Lyons Press, 2001). Prior to the tech-stock bubble, Warren’s Berkshire Hathaway stock was avoided by many investors because he hadn’t participated in the tech-stock buying frenzy. His response as to why he hadn’t was: “We will never buy anything we don’t understand.”

Because of his views on tech stocks, Warren’s Berkshire Hathaway stock price was significantly depressed at the time. Some were saying that he had lost his touch. Like everything else, Berkshire Hathaway stock dropped in price when the tech-stock bubble burst, yet it proved to be a great buy at the time, since its price drop was small when compared to many of the tech-related investments. We’re sure a great many investors wish they’d bought Berkshire Hathaway stock back then.

The lesson is simple: To be a successful investor, you have to do your homework. Don’t be taken in by hype, flashy commercials or promises of inordinately–high yields. And if you don’t have the skills to ask the right questions, take the time to find a trustworthy, qualified professional who can do it for you. It will be well worth the time and money.