At Wall Street Survivor, we’ve always been fans of using famous investment quotes to really hit home in our investing courses. The wise words of super-famous investors, beautifully wrapped up into perfectly concise sentences…famous investment quotes are pretty much where the stock market and poetry meet. We’re into it.
But when you really stop and think about it, these super-successful billionaire investing gurus have it pretty tough. They put in all that hard work over the years and suddenly people want, nay, expect you to give them the secret to your success – in ten words or less!
Fortunately, a lot of those successful investors seem happy to oblige. From Warren Buffett to Peter Lynch (with detours via the likes of Benjamin Franklin and Michael Jordan), here are 10 nuggets of investing wisdom, and what we can all learn from them.
Here are 10 famous investment quotes by famous investors that teach us famous lessons so we can hopefully one day be just as famous:
1. Sir John Templeton, investor and mutual-fund pioneer
“The four most dangerous words in investing are: ‘this time it’s different.’”
In the dot-com bubble of the late 1990s, people said it didn’t matter that most of the internet stocks had never come close to turning a profit: this was a ‘new economy’. Things were different. In the more recent real-estate boom, it didn’t matter that homes were overvalued: we were protected by those complicated derivatives that nobody really understood. Things were different.
The Lesson: Any time you hear that things are different this time, invest as if things are the same as they always were.
2. John D Rockefeller, the world’s richest man in the late 1800s
“The way to make money is to buy when blood is running in the streets.”
It sounds pretty callous, but it’s true. Take a look at any stock chart over a long period, and you’ll see some pretty big dips. Those were obviously the best buying opportunities, but they were also the times when the experts were urging you to sell. It takes courage to buy when everyone else is running for the hills, but if you believe in the long-term fundamentals of the company involved, it’s the right thing to do.
The Lesson: Think long-term. If the long-term outlook is good, then temporary crises are just great buying opportunities.
3. Peter Lynch, successful Fidelity fund manager
“Know what you own, and know why you own it.”
Some investors spend small fortunes on specialist newsletters in which someone else tells them what to buy. Others place their faith in stock tips from a neighbor, a friend, or a guy in a bar. Peter Lynch knew that successful investing was hard work, and that nobody else could do it for him. He studied companies in immense detail, only investing when he was sure he understood their business model and prospects completely.
The Lesson: Do the hard work, and trust your own research, not someone else’s opinion. To find out how to start emulating Peter Lynch, check out our Evaluating a Business course pack.
4. Warren Buffett, the ‘Sage of Omaha’
“Wide diversification is only required when investors do not understand what they are doing.”
This is an interesting one, because it goes against most investing advice you’ll read. Newspapers and websites preach diversification, because it’s a safe investing style that works for most people. But Buffett didn’t get rich by diversifying. He made big calls on stocks he was super-confident about, and because he knew what he was doing, those calls paid off.
The Lesson: If you can honestly say that you understand exactly what you’re doing and what the risks are, take bolder positions on fewer stocks. If not, broad diversification is still the safest bet.
5. Paul Samuelson, Nobel Prize-winning economist
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
Most of the people quoted in this article got rich slowly. They took advantage of long-term growth, the compounding effect – things that are dull, but effective. When they’d bought a stock, they didn’t worry about every zig and zag of the price. They were thinking decades, not minutes.
The Lesson: Embrace dullness. If you really want to speculate on whims and hunches, do it with a limited amount of money that you can afford to lose (some people call this a ‘Mad Money’ account). Or use our stock market simulator.
6. Benjamin Franklin, Founding Father
“An investment in knowledge pays the best interest.”
What’s better: doubling your money on a stock pick, or learning something that helps you make more money for the rest of your life? Clearly it’s the latter. The best investors don’t ever think of their education as complete – there’s always something new to learn. A good place to begin is our Getting Started in the Stock Market courses.
The Lesson: Before you invest in stocks or bonds, invest in yourself.
7. Benjamin Graham, pioneering value investor
“In the short run, the market is a voting machine, but in the long run it is a weighing machine.”
Will the market go up or down today? It depends on the confidence of thousands of investors and traders (mostly institutional), which can shift from bullishness to panic in a heartbeat. Will the market go up or down over the next ten years? It depends on how much money companies make in that time. That’s what Graham was saying, and it’s a valuable lesson. Try to tune out the popularity contest, and focus on weighing the merits of each investment.
The Lesson: You can’t predict the short-term emotional ups and downs of the market, but you can assess long-term value, so invest based on that.
8. Jim Cramer, TV personality and former hedge-fund manager
“Every once in a while, the market does something so stupid it takes your breath away.”
It’s easy to spot these moments of stupidity in hindsight, but not so easy at the time. As Graham said, the market is a voting machine in the short run, and sometimes voters make bad decisions (remember Dan Quayle?). So be prepared for the unexpected, and try to avoid getting caught up in either ‘irrational exuberance’ or panic.
The Lesson: Trust your own judgment, and don’t follow the herd when it seems to be running off a cliff.
9. Jack Bogle, Vanguard founder
“Don’t look for the needle in the haystack. Just buy the haystack!”
This is the opposite of Warren Buffett’s advice. Which one to choose? It depends on an honest assessment of your own ability. If you think you can emulate Buffett’s knowledge, work ethic and stock-picking prowess, make a few big investment calls. For most people, however, Bogle’s advice works best. The market as a whole generally gives good long-term returns, so save yourself the stress and just buy an index fund.
The Lesson: It’s tough to beat the market, but just matching it will generally make you good money in the long run.
10. Basketball star Michael Jordan
Well, OK, this quote wasn’t originally about investing, but is definitely worth reading every time you get the urge to click the “Buy” button on a hot stock tip.
“The minute you get away from the fundamentals – whether it’s proper technique, work ethic, or mental preparation – the bottom can fall out of your game.”
Want more famous investment quotes and teachings? Take some of the courses in our “Investing like the Greats” course pack to get some in depth knowledge into the strategies that these famous investors used to make fortunes.
Did we miss some of your favourite investment quotes? Throw ‘em in a comment below!