Quotes inspire us. Quotes also help us learn. They ingest the wisdom and experience of people who have “been there, done that”. Here is selection of quotes that can guide you through your investment journey.

Why Invest?

The most fundamental question to ask before starting anything. Why do we need to invest?

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In the long run, it’s not just how much money you make that will determine your future prosperity. It’s how much of that money you put to work by saving it and investing it.

– Peter Lynch

Lot of people keep their hard earned money in bank’s savings account. The interest rate paid on these accounts is very low (banks make more money than us on the money in savings account).

How many millionaires do you know who have become wealthy by investing in savings accounts?

– Robert G Allen

I don’t know any yet 🙂

If you invest nothing, the reward is worth little.

– Richelle E. Goodrich

 

Often times, we forget the purpose of investing. There has to be a purpose.

Investing money is the process of committing resources in a strategic way to accomplish a specific objective.

– Alan Gotthardt

Purpose can be to build long term wealth or retiring early. Your aspirations and your goals are your purpose.

When I was young I thought that money was the most important thing in life; now that I am old I know that it is.

– Oscar Wilde

Investing, does not necessarily, is always about money.

An investment in knowledge pays the best interest.

– Benjamin Franklin

Before You Start

Some wise words to follow before we start our investment journey. This is probably the most quoted wisdom from Warren Buffett.

Rule No.1: Never lose money.

Rule No.2: Never forget rule No.1.

– Warren Buffett

Very simply put but very difficult to follow. Sometime people confuse between investing and speculating. Ben Graham – the founding father of value investing and guru of Warren Buffett warns us about speculating.

The individual investor should act consistently as an investor and not as a speculator.

– Ben Graham

Understanding of psychology is important to control your investing behaviour (and avoid speculation). It also helps you understand the crowd behaviour (markets are like crowd)

Investing is the intersection of economics and psychology.

– Seth Klarman

And an objective question to ask –

Every time we make an investment decision at FedEx, we ask ourselves: ‘What is the return on this investment?’

– Frederick W. Smith

Probability of your returns go up if you buy more value by paying what it is worth.

All intelligent investing is value investing — acquiring more that you are paying for. You must value the business in order to value the stock.

– Charlie Munger

A good company can be priced very high in which case the investment opportunity becomes less attractive.

There are no good or bad stocks. The company is either good or bad. Stocks are just stocks.

– Kenneth L. Fisher

On Business

It is important to understand business before investing in any business.

Know what you own, and know why you own it.

– Peter Lynch

Like individuals, businesses also have a purpose (apart from making money).

A business that makes nothing but money is a poor business.

– Henry Ford

Warren Buffet always prefer business that have moats – A moat is competitive advantage that a company possesses. Most of the times it is one of the the following – 1) Brand 2) Network Effect 3) Economies of Scale and 4) Intellectual Property

In business, I look for economic castles protected by unbreachable ‘moats’.

– Warren Buffett

The real skill is in figuring out such businesses. It is always easy to figure out the “next Infosys” or the “next Apple” in hindsight.

In the business world, the rear view mirror is always clearer than the windshield.

– Warren Buffett

Where to Invest?

Investing can be very confusing. Different investors use different frameworks. What one really needs to figure out is – what framework works – eventually every investor comes up with a philosophy.

Based on my own personal experience – both as an investor in recent years and an expert witness in years past – rarely do more than three or four variables really count. Everything else is noise.

– Martin Whitman

Warren Buffett’s investment philosophy has always been about strong conviction. He understands the business and if he considers it worthy, he bets big on it. Lot of novice investors try to copy it, without actually having the acumen of Buffett, and lose money.

Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble

– Warren Buffett

Buffett is also very selective about his picks and believes in investing for very long term.

If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.

– Warren Buffett

And because he understands business so well, he does not believe in diversifying too much.

Wide diversification is only required when investors do not understand what they are doing.

– Warren Buffett

Often times, you will see contradiction in what successful investors say. There is nothing right or wrong.

Don’t look for the needle in the haystack. Just buy the haystack!
– John C. Bogle

 

Be selective in your battles…
– Brandi L. Bates

Important note: It is good to get inspired by successful investors but not good to directly copy them.

Not being carried away!

Successful investors always maintain a fine balance between optimism and pessimism. It helps them ride the vagaries of bull and bear markets. Ben Graham always believed in numbers more than anything else

You can get in way more trouble with a good idea than a bad idea, because you forget that the good idea has limits.

– Benjamin Graham

In his seminal (and must-read) book, The Intelligent Investor, he coins the term Mr. Market to describe the stock market very artfully. His analogies help explain multiple concepts related to markets.

In the short run, the market is a voting machine, but in the long run it is a weighing machine.

– Benjamin Graham

Warren Buffett carried the legacy of Ben Graham. He has warned investors to be careful of leveraging. In bull markets, many investors get carried away.

Only when the tide goes out do you discover who’s been swimming naked.

– Warren Buffett

Leverage is very powerful but can be very risky in markets.

Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.

– Archimedes

Sometimes it is very easy to realize the irrational exuberance, sometimes it is not.

Never invest in any scheme that is based on a metaphor, or anything with the word, “next”, in it (e.g., “this kid is the next Elvis Presley”). You will lose your shirt.

– Clifford Cohen

Its amusing how some people still get carried away with terms like “This time it’s different’ when wise people had warned about it many years back. Just recently, I happened to read a research report from a large broker house with the same subject. My advice: run away from such brokers.

The four most expensive word in the English language are ‘This time it’s different’.

– John Templeton

Markets can really test your patience and ability to remain rational.

Markets can remain irrational longer than you can remain solvent.

– John Maynard Keynes

Being Contrarian

Just think about it – if you believe in the same things that everyone around you believes in, your returns will be more or less same as people around you. It takes a different thinking that enables you to outperform. Being different is necessary but not sufficient. You also need to be right.

You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right-and that’s the only thing that makes you right.

– Warren Buffet

Markets are like crowds and they have collective thinking. Sometimes going against the collective thinking (and being right) pays back.

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

– Warren Buffett

Not just markets, even companies can go through wrong street expectations. Remember the “Maggi” row with Nestle?

Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.

– Warren Buffett

The Investment Biker, Jim Rogers explains how crowds can be wrong.

It’s a basic fact of life that many things “everybody knows” turn out to be wrong.

– Jim Rogers

In his book, he has quoted Rockefeller –

The way to make money is to buy when blood is running in the streets.

– John D Rockefeller

By definition, value investing means buying something at a fraction of value of its actual worth. Seth Klarman, renowned author of Margin of Safety, explains how being contrarian is essence of value investing – the value you assign to something is different from what others believe in.

Value investing is at its core the marriage of a contrarian streak and a calculator.

– Seth Klarman

Being contrarian is not easy though.

If it’s obvious, it’s obviously wrong.

– Joe Granville

What does it take to be a successful investor?

Unlike other things, investing requires completely different skill sets. And some of these are very counter intuitive.

We don’t have to be smarter than the rest. We have to be more disciplined than the rest.

– Warren Buffett

There are three kinds of edges that one can have in investing – informational edge, analytical edge and behavioral edge. With the internet and analysts all around us, informational and analytical edge is almost a commodity for retail investors. It is the behavioral edge that counts.

Twenty years in this business convinces me that any normal person using the customary three percent of the brain can pick stocks just as well, if not better, than the average Wall Street expert.

– Peter Lynch

Buffett goes as far as playing down the role of I.Q. in investing.

If you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don’t need extraordinary intelligence to succeed as an investor.

– Warren Buffett

Investing requires more that I.Q.

Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.  

-Peter Lynch

When markets crashed in 2008, indian markets went down by 60% in a year. Most of mutual funds and stocks were down. Investors who remained invested through that phase reaped great benefits in coming years.

Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.

– Warren Buffett

Seth Klarman lists some more qualities of value investor.

While it might seem that anyone can be a value investor, the essential characteristics of this type of investor – patience, discipline, and risk aversion – may well be genetically determined.

– Seth Klarman

Charlie Munger, long time companion and partner of Warren Buffett never misses to give his wise words on anything under the sun.

It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.

– Charlie Munger

Ben Graham emphasizes the value of discipline and consistency.

Successful investing professionals are disciplined and consistent and they think a great deal about what they do and how they do it.

The investor’s chief problem and even his worst enemy is likely to be himself.

– Benjamin Graham

George Soros echoes Ben Graham on knowing oneself and more importantly recognizing mistakes.

I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.

– George Soros

Timing or predicting the market

Almost all the successful investors have reiterated in the past that it is almost impossible to time the market. In spite of that we see analysts and brokers predicting market movements. It is a hard lessen that people never learn

More money has been lost trying to anticipate and protect from corrections than actually in them.

– Peter Lynch

We do not even need to predict the markets, we need to price it right.

Those with the enterprise lack the money and those with the money lack the enterprise to buy stocks when they are cheap.

-Benjamin Graham

Even Rockefeller – the wealthiest American of all times – never dared to predict the direction of the markets.

“Mr. Rockefeller, what do you think Standard Oil stocks will do?”

“Young man, I think they will fluctuate.”

While some things are not predictable, others are straight forward. Like the one below that Mark Twain stated.

October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.

– Mark Twain

And this one by the legendary John Templeton.

Bull markets are born on pessimism, grow on skepticism, mature on optimism and die of euphoria.

– John Templeton

If you find someone forecasting, you can try to put them in these two buckets described by renowned economist and author Kenneth Galbraith.

There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.

– J.K. Galbraith

On Investing Process

Some traders think that they are investors. Buffett clears that doubt.

Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.

– Warren Buffett

Inactivity means that you say no to most of the investing tips or ideas you get everyday.

The difference btw successful people and really successful people is that really successful people say no to almost everything.

– Buffett

He goes further on inactivity –

I buy on the assumption they could close the market the next day and not reopen it for five years.

Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.

– Warren Buffett

For most of the retail investors, strategy of buy and hold works.

The thing to do with mutual funds is to buy a couple of decent ones, set up an investment plan and then never, ever think about them again, except maybe once a quarter or so when you take a peek at your statements to make sure that you have not accidentally been buying the Fidelity Peace-in-the-Middle-East fund.

– Alex Berenson

Enjoying the buy and sell everyday makes one a trader. The main purpose of investing should be either learning or making money – not entertainment.

If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.

– George Soros

 

On Following Markets

Buffett has very nice analogy for people following markets everyday.

Games are won by players who focus on the playing field –- not by those whose eyes are glued to the scoreboard.

– Warren Buffett

Here is a funny quote by comedian Jon Stewart –

If I’d only followed CNBC’s advice, I’d have a million dollars today. Provided I’d started with a hundred million dollars.  

Jon Stewart

Nobel prize winner Paul Samuelson brings a great analogy –

Investing should be like watching paint dry or watching grass grow. If you want excitement…go to Las Vegas.

– Paul Samuelson

Now, how fun can it be watching paint dry or watching grass grow?

Focusing on short term investments is being Fooled by Randomness – that is a book and if you have not read it yet, please do.

When an investor focuses on short-term investments, he or she is observing the variability of the portfolio, not the returns – in short, being fooled by randomness.

– Nassim Nicholas Taleb

On Learning

Successful investing means continuous learning. While Buffett and Munger have number of quotes related to learning, I have added some lesser known ones here.

What I learned on my own I still remember.

– Nassim Nicholas Taleb

Chinese philosopher Confucius, born in 551 BC, had said something important about learning.

A man who has committed a mistake and doesn’t correct it, is committing another mistake.

– Confucius

While Confucius talks about learning from own mistakes, Seth Klarman emphasizes on learning from others’ mistakes.

Avoiding where others go wrong is an important step in achieving investment success.

– Seth Klarman

On Risk

Risk is an integral part of investing process.

Risk comes from not knowing what you’re doing.

– Warren Buffett

While it is necessary to take risk, it is more important to understand it. Zuckerberg is not a traditional investor but I agree with him on the biggest risk in our lives.

The biggest risk is not taking any risk… In a world that changing really quickly, the only strategy that is guaranteed to fail is not taking risks.

– Mark Zuckerberg

On Consumption

Finally its not just about making money. Money is nothing but a currency you can use to enjoy pleasures in life.

It’s nice to have a lot of money, but you know, you don’t want to keep it around forever. I prefer buying things. Otherwise, it’s a little like saving sex for your old age. 

– Warren Buffett

But managing money is very important.

When money realizes that it is in good hands, it wants to stay and multiply in those hands.

– Idowu Koyenikan

I would end this Quote marathon (or shall I say quotathon) with the final quote from Pablo Picasso.

I’d like to live as a poor man with lots of money.

– Pablo Picasso