Investor hall of fame

Built Berkshire Hathaway by reinvesting profits instead of paying them out.

The lesson

The gap between 19.7% and 10.5% a year looks small. Over six decades it became the gap between 6,099,294% and 46,061% in the letter's own table. That is compounding: each year's gain starts earning gains of its own.

You will not repeat this record, and you don't need to. The same maths works at ordinary rates. Time and not interrupting the growth matter more than a brilliant year. The table also shows losing years, including a fall of 48.7% in 1974 and 31.8% in 2008.

“Originally, this reinvestment was tiny, almost meaningless, but over time, it mushroomed, reflecting the mixture of a sustained culture of savings, combined with the magic of long-term compounding.”

Ran one of the best-known stock funds of the 1980s.

No official record published – lesson only.

The lesson

Anyone who picks many stocks over many years will be wrong a lot of the time. The lesson here is that being right often matters less than how much the winners make compared with how much the losers cost.

This is plain arithmetic, not a claim about his own results. If you are right 4 times out of 10, but each win is three times the size of each loss, you still come out ahead: 4 × 3 = 12 units won, 6 × 1 = 6 units lost, so +6 over 10 tries. Cut the losers small and let the winners run is the habit behind those numbers.

Made low-cost index funds available to ordinary savers.

His result is an idea: low-cost index funds.

The lesson

Bogle's starting point was that most investors are better served by owning the whole market at low cost than by trying to beat it. An index fund simply holds what is in an index, so it needs little research or trading and can charge less.

Costs are taken every year, whether the market rises or falls. A yearly cost of 1.5% sounds tiny, but it turns a 6% return into 4.5%, and that difference compounds just like the return does. Read more in why fees matter.

“Owning the market beats trying to beat the market.”

The idea of a "margin of safety" – leave room for being wrong.

No official record published – lesson only.

The lesson

Graham's margin of safety means you only buy when the price leaves room for your own mistakes. You don't need to be precise about what something is worth if you pay clearly less than that.

For a beginner, the closest everyday version is deciding what you can afford to lose before you buy, not after the price has dropped. If you set the exit point first, one bad decision stays small. Read more in deciding risk before a trade.

“In the short run the market acts as a voting machine; in the long run it becomes a weighing machine.”

Called the "architect" of today's Berkshire by Buffett.

No official record published – lesson only.

The lesson

Munger pushed for owning a few excellent businesses for a long time instead of many cheap, mediocre ones. Fewer, better decisions held patiently, rather than constant activity.

Patience is what lets compounding do its work. Most of the growth arrives late: the second 20 years of a 40-year plan add far more than the first 20. Selling, switching or stopping early cuts off the part that grows fastest.

“But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices.”

Searched the whole world for bargains, buying when others were most gloomy.

No official record published – lesson only.

The lesson

Templeton looked for countries, industries and companies at what he called "points of maximum pessimism" – when most people wanted to sell. He also looked well beyond his home market for opportunities.

You don't need to call the bottom to use the idea. Investing a fixed amount every month means the same money buys more when prices are low, without having to be brave on the day. Spreading money across many countries means no single market decides your result. Read more in risk and diversification.