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Many successful investors know Warren Buffett quotes like the back of their hands.
From humble beginnings in Nebraska, the "Oracle of Omaha" became a millionaire in 1962. He then became a billionaire in 1990.
Buffett now has a net worth of $64.8 billion, so investors listen closely to what he has to say.
But the legendary investor — who bought his first stock at age 11 — isn't a flashy short trader or an activist trying to take over a company.
No, Buffett's investment strategy is simple: buy the stocks of good companies and hold them. That's it.
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His philosophy is especially important to keep in mind during economic uncertainty. That's when investors are prone to panic and make emotion-driven decisions — instead of playing it smart.
"Emotion… More than any source of volatility that can throw markets into a tailspin, emotion is the killer. It forces people to walk – no, make that run – away from generous upside, or sends them hurtling into the path of steep losses," Money Morning Options Trading Specialist Tom Gentile said on June 29.
With that in mind, here are five Buffett quotes to remember when markets start to panic…
5 Warren Buffett Quotes to Keep in Mind When Markets Are Volatile
Warren Buffett Quote No. 5: "Successful investing takes time, discipline, and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant."
The average investor will never make $1 billion in a day playing stocks like George Soros did when he shorted the Bank of England back in 1992. Being a successful investor involves just what Buffett says: time, discipline, and patience.
For example, take Facebook Inc. (Nasdaq: FB). The stock looked like a poor investment when it slid all the way to $19 per share after its $38 IPO offering. But since then, FB stock has netted investors returns as high as 547%.
Even in times of economic uncertainty, good companies are still good companies — markets just don't always treat them that way. Patience is key.
A lot of investors lose money because they don't follow this the advice in Buffett's next quote…
Warren Buffett Quote No. 4: "What we learn from history is that people don't learn from history."
In any endeavor in life, you gain experience over time. That experience can be used to make smarter and smarter decisions, especially when it comes to stock market investing.
To name a few, never invest in an IPO just because of hype; do your own research before investing; understand your risk tolerance; and never invest what you can't afford to lose.
But people are prone to forgetting the past in favor of the emotion of the present. Remember that it's okay to make mistakes — if you learn from them.
Warren Buffett Quote No. 3: "Long ago, Ben Graham taught me that 'Price is what you pay; value is what you get.' Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."
Buffett is known for being a "value investor." Normally he sticks with products and services he knows: insurance, food, beverages, and furniture.
But even Buffett couldn't pass on owning Apple Inc. (Nasdaq: AAPL). The Oracle of Omaha purchased 9.8 million shares at $109 a pop in Q1 2016.
He likely saw Apple stock as extremely undervalued, with a price/earnings ratio of 10.81. Thomson/First Call analysts have a one-year price target of $122.37 on AAPL stock, which means Buffett could make a 12% return. That would be a profit of roughly $127 million. Not too shabby.
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Warren Buffett Quote No. 2: "In the short term, the market is a popularity contest. In the long term, the market is a weighing machine."
It's hard to say why it happens, but there are companies that just become "darlings" of Wall Street.
Take Twitter Inc. (NYSE: TWTR), for instance: It had an IPO price of $26, and it closed at $44.94 on the first day of trading. It climbed all the way to $74.43 on Dec. 23, 2013. Yesterday (Aug. 2), TWTR stock opened at $16.65.
In the short term, stocks can rise and fall based off of hype and hedge fund buying. In Twitter's case, investors who bought in right after the IPO looked like they had done very well, at first. But those who didn't take profits and run at the $70 range suffered from the hype.
Warren Buffett Quote No. 1: "The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd."
Buffett doesn't believe you should follow the "safety" of a crowd. Mob mentality can be even more dangerous than trying to be a contrarian.
But Buffett also warns not to gain pleasure from going against the crowd. In other words, don't invest just to appear smart. It's a tough balance, but critical for investing success.
Buffett praises his trading partner, Charlie Munger, for not wasting time on senseless emotions. Buffett said he's never heard Munger say an envious word about anyone. That seems to have paid off well for Munger, who has a reported net worth of $1.22 billion.
- Forbes: Warren Buffett Real-Time Net Worth
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