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My favorite investing adages

By Dr. Don Taylor ·
Friday, January 3, 2014
Posted: 10 am ET

I've had the idea to do investment adages as a blog post almost since I started doing posts for Bankrate. Having taught investments to college students for many years, I've always enjoyed the investment perspectives offered by different investment sayings. In no particular order, a few of my favorites are presented below. None are original to me, but only a few are attributed to specific individuals. Feel free to post a comment with your favorites at the end of this column.

Investment adages

"The four most dangerous words in investing are: This time is different." -- Sir John Templeton.
Things change and times change, but there's precious little new under the sun when it comes to market forces and investing.

"Be fearful when others are greedy and greedy when others are fearful." -- Warren Buffett.
A behavioral approach to buying low and selling high. Getting in at a market high isn't going to make you money. Nor is selling out at a market bottom.

"The trend is your friend" or "don't fight the tape."
Being bearish when the market is bullish makes it difficult to make money in the market. For contrarian investors to make money, the market has to come around to their thinking. That can take a while.

"Don't put all your eggs in one basket."
An argument for diversification and, with a bit of a stretch, portfolio rebalancing. Especially true when people invest both their human capital and their financial capital in the firm where they work.

"Put all your eggs in one basket and - WATCH THAT BASKET." -- Mark Twain from "Pudd'nhead Wilson." (Often attributed to Andrew Carnegie.) It's the anti-diversification point of view. Keep to what is in your wheelhouse because that is what you know best, and you can better manage the outcome.

"Never confuse brilliance with a bull market." Or, "A rising tide lifts all boats." It's easy to feel good about being invested in the stock market, coming off a year when the S&P 500 earned about a 32 percent yield. Owning the index doesn't make you a market genius.

"Bears make money, bulls make money, pigs get slaughtered." A reminder that greed can be bad. Investors can make money in bull markets. They can make money in bear markets. But, when an investor gets greedy and tries to capture the last dollar in an investment, he or she can get slaughtered.

"No tree grows to the sun." I think this one is my favorite. Growth tapers off with time and maturity. High, price-earning multiples are justified only when a company's earnings continue to grow.

I'm sure I've just scratched the surface. What's your favorite investment saying? (I purposely omitted Michael Douglas playing Gordon Gekko in the movie Wall Street saying, "Greed is Good.")

Reach Dr. Don on Twitter: @drdonsays.

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