Feel like no one really cares how you invest? Once there’s a sizable fortune validating your strategies, people will line up to hear your ideas about investing in stocks.
Luckily, super successful investors have always had plenty to say for free about their investment philosophies. The ever-quotable maxims of investing icons offer insights into the value of prudence, thrift and diligence with a dash of clear-thinking individualism.
Bankrate asked financial professionals for their favorite investing aphorisms from the greats of the industry and what the quotes mean to them.
“In the short run, the stock market is a voting machine, but in the long run, it is a weighing machine.” —Benjamin Graham
Stock prices are all over the place in the short term, but the true worth of a company is revealed over time. Unless they are day trading, investors need the view from 30,000 feet, not an electron microscope.
“The market will weigh value in the long run,” says M. Brendon Marks, business development at Hodges Capital Management in Dallas.
Invest based on a company’s future potential
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Philip Fisher
Market prices don’t always reflect value. Choose investments based on long-term prospects, not recent performance.
“Price is an issue in the absence of value. Thus, price becomes relative. Is $1,000 too much? Can’t tell unless I know what I am getting in return. This is evidenced by the investor who arbitrarily assigns a value or selects one based on a narrow focus,” says CFP professional Robert Fragasso, chairman and CEO of Fragasso Financial Advisors in Pittsburgh.
Know the true worth of investments to whatever degree possible.
“If you have trouble imagining a 20 percent loss in the stock market, you shouldn’t be in stocks.” —John C. Bogle
Stock prices go up; stock prices go down. Over time, the direction is mostly up.
“Investors that can’t imagine life with a temporary reduction in the value of their portfolio are typically not suited for a large allocation to equities. These investors are tempted to get out of stocks when markets are down, but recoveries come unannounced and are often just as swift and dramatic as the prior correction,” says CFP professional Peter Lazaroff, CFA, portfolio manager at Acropolis Investment Management in St. Louis.
“Buy when most people — including experts — are pessimistic, and sell when they are actively optimistic.” — Benjamin Graham
The secret to investing is to buy low and sell high. You can’t do that if you only buy when the market is firing on all cylinders and sell when it tanks.
“If you’re able to capitalize on emotion and buy stocks when they are low and have true intrinsic value that is not recognized by the market, you will be able to outperform any benchmark any time,” Marks says.
“The four most dangerous words in investing are: ‘This time it’s different.'” — Sir John Templeton
Bubbles and crashes happen with surprising regularity; bull and bear markets both come to an end.
“There are no new paradigms. Everything old simply comes around again, just packaged somewhat differently. When folks are ignorant of history or fail to see the similarities, they are unable to cope with current events. This results in a sky-is-falling, self-destructive reaction. Instead, an understanding of cycles will provide insight for rational action,” Fragasso says.