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01. Sep 14:11

Warren Buffett quote #3

Here is another famous quote from Warren Buffett: “Investing is laying out money now to get more money back in the future.” Warren Buffett is the most successful investor of our time, perhaps of any time. He is famous for his pithy and witty quotes, which often appear in his annual letter to shareholders. When strung together, his quotes pretty well sum up his investment philosophy and approach. This quote is in a way simple, but also very meaningful, powerful and real. It’s easy to think of ‘saving’ as investing. While the two often go hand in hand, they also work quite differently. On a practical level, saving involves putting aside money today for use in the future. It’s what economists describe as ‘forgone consumption’. In other words, rather than spending all your money, you tip some into a savings account for another time. Savings is a sensible starting point in investing because it provides the funds you need to purchase a range of different assets. However investing goes one step further, helping you achieve personal goals with three significant benefits. While saving means setting aside part of today’s money for tomorrow, investing means putting your money to work to potentially earn a better return over the longer term. Different classes of investment assets – cash, fixed interest, property and shares – typically generate different levels of return (which is relative to the risk of the investment). It is possible to earn extra income by investing in quality investments. The return on your investments might be used as a source of regular extra income for day-to-day living. Or you might choose to reinvest the money to further grow (or compound) your wealth. The bottom line is that savings are important. Depending on your appetite for risk the benefits of investing can mean having more than some ‘rainy day’ cash. And remember - The most important quality for an investor is temperament, not intellect. Warren Buffett knows this. Listen to him ;-)