Reflecting on investment quotes from some of the most popular and successful investors is a good way to gain practical wisdom needed to achieve your own unique investment goals.
It’s a truism that there is nothing you want to do that others have not done before you. In the investment world, the success you crave on your road to building wealth has been achieved by others in the past. Therefore, a smart step towards achieving your investment goals is to learn from others who have already succeeded (and are succeeding).
In a previous article, we considered the top 20 Warren Buffett investment quotes. Here, we look at 20 investment quotes from other successful investors that offer additional wisdom that you can apply on your road to building wealth.
At the end of this article, you should have enough investment wisdom to reshape your attitude towards investing, build a successful portfolio, and plan out a strategy to achieve your investment goals.
1. “The average man … tends to buy high and sell low.” — Ray Dalio
One of the foundational problems that causes people to lose money in the market is that they follow the crowd.
This herd mentality makes them buy stocks (or other assets) when everyone is buying and there is loads of excitement. At this point, market excitement has driven the price up. But when the stock becomes bearish and prices are coming down, they sell since there is no more excitement to keep the price soaring.
At the end, the “average man” has bought the stock for a high price and sold it for a low price, losing money in between.
Warren Buffett once described this as the fear-greed cycle. Average investors buy high because of greed and then sell low because of fear, locking themselves in a vicious cycle of financial losses.
According to Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund, this mindset is not sustainable and “an average man should not be playing the game this way.”
2. “The people who are buying stocks because they’re going up and they don’t know what they do, deserve to lose money.” — Jim Cramer
Jim Cramer, the former manager of Cramer and Co., a hedge fund, and current host of Mad Money on CNBC, agrees with Ray. Buying stocks solely because they are going up is a sign that one doesn’t know what they’re doing.
This is a proven recipe for losing money.
3. Buy when everyone else is selling and hold until everyone else is buying. That’s not just a catchy slogan. It’s the very essence of successful investing. — J. Paul Getty
For J. Paul Getty, founder of the Getty Oil Company, smart investors do the exact opposite of what average investors do. They buy low, when everyone is selling, and they sell when everyone else is buying.
To these smart investors, bear markets are not bad news; rather, they are opportunities to find good companies and buy them when they are undervalued. And when everyone is rushing to buy in a bull market, pushing prices high, they sell once the stock becomes overvalued.
4. “Know what you own, and know why you own it.” — Peter Lynch
In contrast to the average man’s mindset, Peter Lynch, former manager of Magellan Fund at Fidelity Investments, insists that you must know what you own and why you own it. The latter is the key difference between successful investors and average ones.
Knowing why you own a stock means you have done proper research (instead of following the crowd) and you understand why that particular stock fits into your overall investment strategy and goals.
5. “The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher
Philip Fisher, author of Common Stocks and Uncommon Profits, a widely acclaimed investment book that Warren Buffett once called a “very good book,” agrees with Peter Lynch. It’s never enough to know the price of stocks; investors must peel beyond the surface to understand its value — what value investors call the “intrinsic value.”
What determines if the price is fair or not is how it compares to the intrinsic value.
Most stocks that become popular on the back of market excitement are often overvalued. And instead of hunting for good stocks that are currently undervalued by the market, many investors lose money on these overvalued stocks.
To restate Philip’s thought: never buy any stock until you know its intrinsic value.
6. “We don’t prognosticate macroeconomic factors, we’re looking at our companies from a bottom-up perspective on their long-run prospects of returning.” — Mellody Hobson
In considering the intrinsic value of a stock, you will need to dive deep into its fundamentals. For Mellody Hobson, president of Ariel Investments, focusing on the company’s fundamentals — long-run prospects of returning — is more important than prognosticating macroeconomic factors like inflation, interest rate, GDP growth rate, among others.
A company with good fundamentals — growing return to equity, growing profit margin, falling debt-to-equity ratio, falling current ratio, among others — will survive in difficult macroeconomic situations and continue to thrive over the long term.
Therefore, instead of always wondering what the next macroeconomic situation will be like — for instance, will inflation rate rise or will the Federal Reserve further lower interest rate? — you should focus on selecting companies with good fundamentals and, to add the insights of value investors, buy them when they are undervalued.
[To see what Warren Buffett looks for in his stocks and the top stocks he currently owns, read, “What You Can Learn From Warren Buffett’s Top Stock Holdings”]
7. “Thousands of experts study overbought indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply…and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.” Peter Lynch
Peter Lynch agrees with Mellody on the need to prioritise fundamentals.
In addition to telling us to know what we own (focus on fundamentals), he also insists that technical analysis cannot help anyone consistently predict the ebb and flow of the market. In fact, a 2010 University of California, Davis report shows that 80% of day traders quit within the first two years with only 1% making profit net of fees.
Consequently, instead of obsessing over technical analysis or macroeconomic factors, select quality stocks with sound fundamentals that will perform well over the long term.
8. I don’t invest in companies where my mental model is that they need to get themselves acquired in the next few years – or ever — Sam Altman
One of the essential fundamentals that Sam Altman, the 36-year old former president of Y Combinator, a tech startup accelerator, looks for in good companies is “going concern”, which is the company’s ability to keep existing. If he thinks that a company will need another company to acquire them to survive or stay afloat, he will avoid it.
A fundamentally sound company will have a sustainable competitive advantage that will help it maintain or grow its market share and stay competitive in its industry.
Though Altman is primarily concerned about VC (venture capitalist) investments, this belongs to our list of financial quotes because buying a share of a company is the same as buying the company as a whole. You should only buy shares in a company that is sound.
9. “Courage taught me no matter how bad a crisis gets … any sound investment will eventually pay off.” — Carlos Slim Helu
When companies have the “long-run prospects of returning” that Mellody mentioned, they always have a way to pay off even amidst an unforeseen crisis, according to Carlois Slim Helu, the sixteenth-richest person in the world and owner of Grupo Carso, a mega Mexican conglomerate.
For example, Moody’s, a company owned by Warren Buffett, had a negative return on equity (-295.69%) at the end of Q2, 2011, following the 2008/2009 financial crisis. However, at the end of Q2, 2021, return on equity was 103.97%.
To summarise, bad times don’t last but good companies do.
10. “Don’t look for the needle in the haystack. Just buy the haystack!” — John Bogle
However, finding good companies is not so simple. More difficult is finding good companies that can repeat the success of companies like Coca-Cola, Amazon, Apple, etc. Many investors have lost millions of dollars betting on the next Amazon, Apple, Coca-Cola. John Bogle, founder of The Vanguard Group, the second-largest provider of Exchange-Traded Funds in the world, compares this to trying to find a needle in a haystack.
Instead of looking for the needle — the next great Amazon or what have you — he encouraged investors to buy the haystack. This was his way of recommending index funds and ETFs, investment assets that allow investors to get a stake in the stocks contained in an index. For example, the S&P 500 is an index that tracks the performance of the 500 largest US companies. By buying an S&P 500 index fund or ETF, you will have a stake in all the 500 companies that are part of the index. Instead of finding the needle among the 500 companies, you can just buy the whole index.
Over the years, this form of investing (the haystack instead of the needle), also known as passive investing, has proven to be less costly and more profitable than its active counterpart. It has also grown so much over the years that this list of the top 20 investment quotes would have been incomplete without saying some words about it.
[For more on passive investing and ETFs, read, “Why Invest in ETFs? Explaining the Popularity of The Go-To Fund”]
[For more on the differences between active and passive investing, read, “What’s the Difference Between Active and Passive Investment?”]
11. How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case. — Robert G. Allen
Investing in diversified portfolios does not reduce your risk to zero. Even a diversified portfolio of stocks will still be riskier than keeping your money in a savings account.
However, Robert Allen, author of Cracking The Millionaire Code, believes that playing it safe with savings accounts won’t make anyone a millionaire. For example, while the best annualised returns on a savings account in the UAE is 1.75%, the S&P 500 Index annualised returns was 23.46% for the past five years.
Despite its higher volatility, stocks are still the best way to build wealth. Investors must, therefore, learn to use diversification to minimise risks and maximise returns instead of ditching stocks for savings accounts.
12. “Invest for the long haul. Don’t get too greedy and don’t get too scared.” — Shelby M.C. Davis
Focusing on fundamentals only makes sense if investors are committed to investing for the long haul. Shelby Davis, founder of Shelby Cullom Davis and Co., has said that investing for the long haul is the best way to overcome the fear-greed cycle.
Every stock will fall and rise in the short term as a result of market speculation. However, fundamentally sound stocks will grow over the long term.
Research by the Center For Research in Security Prices (CRSP) shows that from 1926 to 2018, the market rose (74%) more than it fell (26%). Also, within the same period, data shows that the longer you stay in the market, the lower the chances of losing money, and vice versa.
[For more on the benefits of long-term investing, read, “Dollar-Cost Averaging vs Lump-Sum Investing: How Should You Invest?”]
13. “A 10% decline in the market is fairly common—it happens about once a year. Investors who realise this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealth building power of stocks.” — Christopher Davis
Stocks are volatile and it is perfectly normal that they will rise and fall in the short term. In fact, Christopher Davis, a director at Coca-Cola Company, says that a 10% decline in the market happens about once a year.
When such a decline is happening, investors should not panic and sell; rather, they should realise it’s part of the cycle. The most important thing is the long-term growth of your money and the wealth you can build by keeping invested in those stocks.
14. “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” — Paul Samuelson
Paul Samuelson, a Nobel Prize winner in Economics Science, uses an exciting metaphor to teach the importance of long-term investing. It takes time for paint to dry and for grass to grow. And the person who is watching those two processes must be patient.
In the same way, investors must patiently wait and watch as their portfolio grows. Or as Warren Buffett once colorfully put it, “You can’t produce a baby in one month by getting nine women pregnant.”
Samuelson admits that waiting is not as exciting as buying and selling regularly and reading candlesticks and technical indicators. However, successful investors have learnt the value of waiting.
Anyone who wants excitement should take $800 to Las Vegas. But for those who want to build wealth, calmness and patience trump excitement.
15. “A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” — Charlie Munger
However, to focus on the long term and ignore short-term fluctuations requires that investors develop emotional intelligence — that is, “keep raw, irrational emotion under control,” according to Charlie Munger, the Vice Chairman of Berkshire Hathaway, the group of companies chaired by Warren Buffett.
It’s not easy to watch your stocks fall in price or your portfolio lose value. This is why, for Munger, a calm temperament is more important than a high IQ.
Very intelligent people can still make terrible decisions when things are bad. However, it doesn’t require a high intelligence to acquire a cool and collected demeanor, an essential characteristic to make better decisions in the stock market.
16. “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioural discipline that are likely to get you where you want to go.” — Benjamin Graham
Keeping raw, irrational emotion under check is what Benjamin Graham, the father of value investing, mentor of Warren Buffett, and author of The Intelligent Investor, calls “behavioural discipline.”
But for Graham, behavioural discipline does not only mean investing for the long term; it also means having a financial plan and sticking to it. Instead of obsessing over whether you are beating the market or not, create a sound financial plan that will help you achieve your investment goals.
[Want to create a financial plan that will help you achieve your financial goals? Schedule a call with a Sarwa wealth advisor to get started.]
17. “If you have what you want in mind, everything that you invest in should be working to push you further toward your goal.” — Tiffany Welka
Tiffany Welka, a 34-year old financial advisor at Corecap Advisors, agrees with Graham that every investment decision you take should be directed towards achieving your financial goals.
Consequently, setting clear financial goals should be the first step before investing a dollar. Financial goals can range from retirement, financial independence, college savings, down payment on a home, etc. The most important thing is to have a clear goal(s) and create a financial plan to achieve them.
[To learn how a digital financial planner can help you clarify and achieve your goals, read, “How Can An Online Financial Planner Help Me Build Wealth”]
18. “Money is my military, each dollar a soldier. I never send my money into battle unprepared and undefended. I send it to conquer and take currency prisoner and bring it back to me.” — Kevin O’Leary
To better illustrate the importance of having a sound financial plan to achieve your financial goals, Kevin O’Leary, chairman of O’Leary Funds Inc., uses warfare imagery. Just as a commander should not send soldiers to war unprepared and undefended, investors should not send money to the market without a plan. Instead, every dollar should be prepared to conquer and bring in more dollars.
Compounding is the process by which money earns interest and every interest also earns additional interest. However, for investors to enjoy the benefits of compounding, they must ensure that every invested dollar is going to the “war zone” with a clear strategy.
In addition to sending his dollars prepared into the market, he also wants to defend them. Warren Buffett agrees that the first rule of investing is to never lose money. This is understandable since the only money that can grow is capital that is not lost.
Kevin does this through diversification. By investing in various asset classes — stocks, bonds, gold, real estate, venture capitals, cryptocurrency, etc., he’s able to reduce the overall risk of his portfolio and set it up for greater long-term success.
In his personal practice, he does not keep more than 20% of his investments in one sector (and he treats cryptocurrency and real estate as a sector just like financial, IT, healthcare, etc.) and not more than 5% in one asset.
19. “In choosing a portfolio, investors should seek broad diversification. Further, they should understand that equities–and corporate bonds also–involve risk; that markets inevitably fluctuate; and their portfolio should be such that they are willing to ride out the bad as well as the good times.” — Harry Markowitz
The theoretical foundations of diversification came from Harry Markowitz, a Nobel Prize winner in Economics Science, through his popularised Modern Portfolio Theory.
According to him, broad diversification in non-positive-correlated assets will reduce the overall risk of a portfolio; when one asset is falling in value, the others remain the same or are increasing in value instead of falling with it.
Such broadly diversified portfolios will provide protection in bad times, allowing investors to survive even when the market is fluctuating.
[For more on the importance of diversification, read, “Learning The Importance of Portfolio Diversification Can Prevent Huge Loss. Here’s Why.”]
20. “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” — Robert Kiyosaki
Our final financial quote is from Robert Kiyosaki, author of Rich Dad, Poor Dad. It summarises some of the key points we have identified from the other investment quotes above. The first part of this statement emphasises that while investing is important, there can be no investing without saving. Said differently, it’s money you didn’t spend that you can invest.
[To learn more about how to save money in Dubai, read, “12 Hacks for How to Save Money in Dubai Like A Resident”]
Secondly, you must ensure that the money you save is working hard for you. This means not leaving it in savings accounts, as Robert Allen warned, and sending it into the market prepared and defended, as Kevin O’Leary encouraged.
Thirdly, you have to keep that money invested for a long time. Short-term thinking must give way to long-term wealth building. Rome was not built in a day; neither is wealth.
Sarwa is a Dubai-based digital financial advisor that can help you build wealth by creating sound financial plans to achieve your financial goals through diversified portfolios that grow over the long term.
To learn more about Sarwa and how we can help you, schedule a free call with a Sarwa wealth advisor.