Really Hurts: Warren Buffett Made A $5 Billion Mistake — 'I Was Sucking My Thumb' Instead Of Buying Fannie Mae For 'Practically Nothing'

Even Warren Buffett, one of the most legendary investors of all time, isn't immune to regret. But here's the thing—his biggest mistakes aren't the bad investments. They're the missed ones. And unlike a bad trade that you can sell off, these mistakes don't show up on balance sheets or earnings reports. They exist only in hindsight.

Speaking to students at the University of Georgia in 2001, Buffett opened up about one particular misstep that still stings: a massive, missed opportunity with Fannie Mae that could have made Berkshire Hathaway BRK BRK.B))  at least $5 billion.

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"The biggest mistakes we've made by far—I've made, not we've made—are mistakes of omission and not commission," he said. "They were within my circle of competence, and I was sucking my thumb. And that is really… those are the ones that hurt."

The $5 Billion ‘Thumb-Sucking' Moment

Buffett recalled how 20 years earlier, Fannie Mae was struggling. The mortgage giant was drowning in financial trouble, battered by sky-high interest rates and economic challenges. It was, as Buffett described it, a golden opportunity—one that he fully understood, yet still didn't act on.

"I probably cost Berkshire at least $5 billion, for example, by sucking my thumb when Fannie Mae was having some troubles," he admitted. "We could have bought the whole company for practically nothing."

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For someone with Buffett's track record, this wasn't just another missed investment—it was a glaring error in judgment. And what makes it worse? No one would have ever known about it if he didn't admit it himself.

"Unless I tell you about them in the annual report—and I resist the temptation sometimes—you're not going to know it because it doesn't show up under conventional accounting."

The Fannie Mae Context: What Buffett Saw and Still Hesitated On

To put this in perspective, Fannie Mae was in serious trouble in the early 1980s. The company was bleeding from rising interest rates, struggling to stay afloat, and investors were nervous. Buffett, with his deep understanding of financial institutions, saw the potential.

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By 1988, he finally moved—but in a much smaller way than he could have. In his 1991 Berkshire Hathaway shareholder letter, Buffett reflected on that moment:

"In early 1988, we decided to buy 30 million shares (adjusted for a subsequent split) of Federal National Mortgage Association (Fannie Mae), which would have been a $350-$400 million investment."

Had he taken full advantage when Fannie Mae was truly struggling, the returns could have been astronomical. Instead, he hesitated. And it cost him.

The Investing Lesson: Big Opportunities Don't Come Often

Buffett didn't just share this mistake for fun—he wanted to hammer home a lesson for investors: missed chances can be just as costly as bad decisions.

"Big opportunities in life have to be seized. We don't do very many things, but when we get the chance to do something that's right and big, we've got to do it," he told the students. "You're not going to get 500 great opportunities."

And he's right. Investors often worry about making the wrong move, but failing to act can be just as damaging—if not worse.

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Avoiding Your Own $5 Billion Mistake

Buffett's story is a reminder that hesitation in investing can cost just as much as making a bad bet. The problem? Most people don't even realize what they've lost. You may not be leaving billions on the table — but it still stings.

Having a clear investment strategy, recognizing when an opportunity aligns with your expertise, and not letting indecision paralyze you. But even seasoned investors second-guess themselves.

That's where a financial advisor can make all the difference. A good advisor can help you cut through the noise, weigh risks, and ensure you don't miss out on the kind of investment that could change your future.

The lesson is simple: when you see a great investment, don't sit on the sidelines. Because as Buffett learned the hard way, those are the mistakes that really hurt.

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