Throughout history, many great investors have made memorable quotes about investing which can help make us better investors. Here are my top 10 picks in no particular order.
1. “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes” – Warren Buffett
Stock prices might tick up and down every second, but there is really no need for investors to fall into the trap of following the market’s short-term moves. Instead, investors should think long-term, and only invest in businesses which allows you to sleep soundly at night.
2. “Know what you own, and know why you own it” – Peter Lynch
We must always invest with a clear understanding of what we are getting into. There is nothing more dangerous than investing without any knowledge of what we are buying.
On top of that, it is rewarding if we keep an investment diary and record the reasons for the investment decisions we’ve made. The diary can then allow us to look back on our investing thoughts and see if the original thesis still holds – this can help us be less emotional in our decision-making and thus reduce our chances of committing errors.
3. “The stock market is the story of cycles and of the human behaviour that is responsible for overreactions in both directions” – Seth Klarman
This is embodied by recent experiences in Singapore’s market. The presence of overwhelming fear during the Great Financial Crisis pushed the Straits Times Index (SGX: ^STI) to real bargain territory with a price/earnings (PE) ratio of just 6.2 at the start of 2009.
At the other extreme, we have shares like Blumont Group Ltd (SGX: A33) and Asiasons Capital Limited (SGX: 5ET). In 2013, exuberance from market participants pushed both shares to unsustainably high valuations of more than 500 times earnings near their peak prices. Both shares are now down by more than 90% from their all-time highs after suffering an epic crash on October 2013.
4. “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful” – Warren Buffett
We should view the market as our irrational business partner. Our job as an investor is not to be influenced by the market but rather, understand his temperament and take advantage of his wild mood swings.
5. “In the short run, the market is a voting machine, but in the long run it is a weighing machine” – Benjamin Graham
Luck plays a big role in investing in the short run. However, the longer we stay invested, the less we need to depend on luck as share prices would gravitate toward the true value of their underlying businesses.
6. “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring”- George Soros
Investing is about making money, not excitement. If you are seeking excitement, you are going down a dangerous road.
7. “The market can remain irrational longer than you can remain solvent” – John Maynard Keynes
We should never over-leverage ourselves when investing. Even if we are right about our investing decisions over the long run, leverage can still destroy us if we are not careful as the market can move in unpredictable ways for far longer than we can imagine.
8. “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case” – Robert G. Allen
The only way to financial freedom is to take charge of your own financial future. Instead of fearing the share market, we should learn about it as it is a great way for us to build our wealth.
9. “Investment is most intelligent when it is most business-like”- Benjamin Graham
Stocks are more than just a piece of paper: It symbolizes part ownership of a business. Thus, in order for us to be a successful investor, we have to think like a businessman in every investment decision we make.
10. “Real knowledge is knowing that you don’t know anything” – Charlie Munger
Lastly, it is important for us investors to understand that learning about investing is an on-going process. We must stay humble when facing the market. Overconfidence is the enemy of the investor.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own any companies mentioned above