The best investment quote of all time didn’t come from Warren Buffett!

Warren Buffett’s pithy quotes are both relevant and insightful. But the American billionaire didn’t come up with our writer’s favourite.

| More on:
Warren Buffett at a Berkshire Hathaway AGM

Image source: The Motley Fool

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Warren Buffett’s often described as the world’s most successful investor. With an estimated fortune of $140bn, I can see why he’s credited with being number one. And given this status, it’s not surprising that he attracts a cult-like following with many of his quotes — so-called ‘Bufett Bites’ — being used to justify a value-driven approach to investing.

But my favourite piece of advice came from Ben Graham, the American economist. He once wrote: “The individual investor should act consistently as an investor and not as a speculator”.

It’s not particularly memorable. And it doesn’t have Buffett’s style. But I think it’s the most valuable. And one that I wish I’d followed when I started on my own investing journey many years ago.

Buffett has often credited Graham with being the inspiration behind his approach to buying stocks. Indeed, he has his own version of the quote — “Our favourite holding period is forever”.

So what does Graham’s (and Buffett’s) quote mean?

The father of value

In his book, The Intelligent Investor, Graham distinguishes between an investor, who’s keen to preserve their capital and seeks a reasonable return, and a speculator, who might lose everything in pursuit of a greater reward.

When I first started investing, I fell into the latter category. I wasn’t too reckless but relatively modest returns didn’t interest me. I soon realised this was a mistake. Trying to ‘time the market’ almost never works.

Since January 1986, the FTSE 100 has delivered an annualised return (with dividends reinvested) of 8.6%. Other markets have done better. For example, the S&P 500 grew by 11.4% a year during this period.

But if I’d invested £20,000 in UK equites 38 years ago — and matched the Footsie’s return — I’d now have £459,794.

The benefit of hindsight

And if I was to start my investing life again, I’d buy a share like National Grid (LSE:NG.) and forget about it. That’s because it’s a steady but reliable performer.

The company’s principal activity is the transmission and distribution of gas and electricity on both sides of the Atlantic.

Due to the huge investment required, it’s not practical for more than one company to operate in its markets. This means it enjoys monopoly status. Although it’s regulated, which means it can’t charge what it likes, as long as it keeps the lights on it’ll know with a reasonably degree of certainty how much money it’s going to make.

In turn, this makes its dividend reliable. The stock’s currently yielding a very healthy 5.9%.

And the group’s anticipating growth in its earnings per share of 6%-8% up until 2029. This should help it grow its dividend.

Of course, nothing’s guaranteed when it comes to investing. The company has large borrowings. And it surprised investors in June when it announced a rights issue, to help fund its massive capital investment programme.

However, if I was looking for an investment to hold for the next 20 years (I’m not, because I hope to be retired by then) I’d pick National Grid.

Finally, to those who disagree with me about the value of long-term investing, I’d refer them to the performance of Berkshire Hathaway, Buffett’s holding company.

An investment of $20,000 in 1964 would have grown to $88bn by the end of 2023!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended National Grid Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Dividend Shares

£3k in savings? Investors could consider putting it here for juicy second income

Jon Smith talks through how investors could buy dividend stocks with yield potential in excess of 6.5% for second income

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

Why the boohoo share price soared by almost 14% in November

Is troubled online fashion retailer boohoo beginning a turnaround that may cause the share price to rocket through 2025 and…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

Here’s how saving £5.40 a day could net me £1,971 yearly passive income for life

The price of a cup of coffee seems to have broken the £5 mark. Is it time to put that…

Read more »

Investing Articles

2 top FTSE 100 stocks surging to record highs (hint — not Rolls-Royce)!

Ben McPoland takes a closer look at a pair of high-performing FTSE 100 stocks that continue to enrich long-term shareholders.

Read more »

Investing Articles

A cheap FTSE 100 share to consider buying for the next 10 years!

This FTSE 100 share has pride of place in my portfolio. Here's why I think it could be a top…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Down 44% in 2 months! Is this FTSE 250 green energy pioneer priced too cheaply?

After a sharp tumble in recent months, this FTSE 250 company with a growing order book is almost 90% below…

Read more »

Investing Articles

Investing a £20k Stocks and Shares ISA in this high-yielder might give me a £2,000 annual income

Harvey Jones is now wondering whether to pour his entire Stocks and Shares ISA allowance into a single FTSE 100…

Read more »

Investing Articles

Saving £20k in an ISA? Here’s how I’m aiming to turn that into a stunning £2,035 monthly passive income

Harvey Jones is keen to build a high and rising passive income by investing in a balanced spread of top…

Read more »