Stock market conditions change. Good investment advice is timeless. When it comes to investing in the stock market, most people don't know where to start. Some of the best investors of all time digested their thinking in quotes that stand the test of time. In this article, I list the contribution these investing masters have passed on to future generations. There are many to choose from. I narrowed down the list to 20 investment quotes and sorted them into 5 categories:
- How to become (and stay) wealthy
- Building knowledge and investing in yourself first
- Risk, reward and errors
- Emotions and psychology of the crowd
- Market timing and predictions
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Quotes on how to become (and stay) wealthy
"Someone’s sitting in the shade today because someone planted a tree a long time ago."
— Warren Buffett
There is no easy or fast way to get rich. The only way to get wealthy is to own a piece of a business. It can be your own or someone else's. The slow and steady growth of these businesses leads to wealth. You need to do the work now (plant the tree) to achieve success later (sit in the shade).
"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
“There are plenty of ways to get ahead. The first is so basic I’m almost embarrassed to say it: spend less than you earn.”
— Paul Clitheroe
The exponential growth rate is slow at the beginning (and often mistaken for linear) because compound interests take time to kick in. Saving is even slower. You are here for the long haul.
“Compound interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t… pays it.” – Albert Einstein
"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
And then, when the magic happens, and you start to benefit from compound interests, your main problem won't be to get rich but to stay rich.
Quotes on knowledge and history
“An investment in knowledge pays the best interest.”
— Benjamin Franklin
Investment is boring, especially at the beginning. Use this time to build your knowledge. Before looking for the best stocks to invest in, the next Facebook or the next Amazon, you should start investing in yourself. Reading my articles is the first step; reading books is another.
The four most dangerous words in investing are: ‘This time it’s different.'”
— Sir John Templeton
As investors, you are investing on probabilities. Understanding the past, understanding business cycles, and market regimes put the probabilities on your side. To improve your chances of predicting the future, you need to understand the past.
Quotes on risk, reward, and errors in the stock market
"In investing, what is comfortable is rarely profitable." — Robert Arnott
When investing, you look for return. No matter how good you are, return comes with risk. The greater the return, the greater the risk. This quote from Robert Arnott illustrates that you must be prepared to feel uncomfortable to be a good investor. Especially if you are looking for above-average returns.
"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong."
— George Soros
And you should be ready to lose money. Good investors focus on returns, great investors focus on risk.
“The first rule of investment is: Don’t Lose. And the second rule of investment is: Don’t forget the first rule.”
— Warren Buffett
You will be wrong; you will make mistakes. Being wrong sometimes won't harm you. When you are wrong, accept it, and make proper corrections. The most important thing is to stay in the game. If you take care of the downside, the upside will take care of itself.
Quotes on emotions and psychology of the crowd
The wisdom of the crowd fascinates me. To the point that, a few months ago, I published a research paper on the subject: Collective rationality and functional wisdom of the crowd in far-from-rational institutional investors. However, the wisdom of the crowd is rare. It only emerges when a specific set of conditions are met (such as independence and equal access to information). It is often not the case in finance.
Isaac Newton himself resigned from investing after losing about 20,000 pounds ($2.5 million in today's money) due to his speculation in the South Sea Company stock in the 1720s during the bubble. He then famously said:
“I can calculate the motions of the heavenly bodies, but not the madness of people.”
— Isaac Newton
Markets can become irrational. You must stay rational, no matter what. Don't let your own emotions cloud your decisions. How? Back your investment decisions by facts and numbers.
"Markets can remain irrational longer than you can remain solvent."
— John Maynard Keynes
“The intelligent investor is a realist who sells to optimists and buys from pessimists.”
— Benjamin Graham
Always connect business and market narrative to numbers. Identify what is overvalued, sell it. Identify what is undervalued, buy it.
“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” – Sir John Templeton
Quotes on stock market timing
“Large price changes tend to be followed by more large changes, positive or negative. Small changes tend to be followed by more small changes. Volatility clusters.”
— Benoit B. Mandlebrot
Market timing is the strategy of making buying or selling decisions by predicting future market price movements. It is hard and can lead to poor performance. Why?
It’s difficult to make predictions, especially with regards to the future.”
— Old Proverb
It is probably the reason why Warren Buffett himself does not have an exit strategy:
“In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
Nevertheless, if you still want to try, here are some investment quotes that proved to be helpful:
“I will tell you how to become rich. Be fearful when others are greedy and be greedy when others are fearful.”
— Warren Buffett
“The time to buy is when there’s blood in the streets.”
— Baron Rothschild
A bull market begins when a bear market comes to an end. A bear market stops when every seller has sold. There is now a lot of cash waiting on the sidelines. If you did not get caught in the fire and speared some cash, congrats, you are now ready to ride the next wave.
What is your best investment quote? Tell us in comment below ;)