Quotes on Intelligent Investing

As someone who reads often, i often encounter short sentences, or paragraphs, that perfectly encapsulate the essence of the topic.

I will update the ones on investing here.

If you’re not the kind to do a lot of reading. This would probably be especially useful for you. However, a good thing is best said well.

It would be better if you read the book, and see these ideas fully expanded along with the examples.

 

Quotes by Benjamin Graham

“Those who do not remember the past are condemned to repeat it.”

“The stock investor is neither right or wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.”

“The intelligent investor is a realist who sells to optimists and buys from pessimists.”

“But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”

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

“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”

“A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.”

“On the other hand, investing is a unique kind of casino—one where you cannot lose in the end, so long as you play only by the rules that put the odds squarely in your favor.”

“You will be much more in control, if you realize how much you are not in control.”

“invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.”

“Investment is most intelligent when it is most businesslike.”

“The punches you miss are the ones that wear you out. —Boxing trainer Angelo Dundee”

 

Quotes by Warren Buffett

“If you are a professional and have confidence, then I would advocate lots of concentration. If it’s your game, diversification doesn’t make sense. It’s crazy to put money in your 20th choice rather than your first choice… [Berkshire Vice Chairman] Charlie [Munger] and I operated mostly with five positions. If I were running $50, $100, $200 million, I would have 80% in five positions, with 25% for the largest.”

“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

“For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.”

“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”

“The best thing that happens to us is when a great company gets into temporary trouble…We want to buy them when they’re on the operating table.”

“You only have to do a very few things right in your life so long as you don’t do too many things wrong.”

“What counts for most people in investing is not how much they know, but rather how realistically they define what they don’t know.”

“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”

“Equities will do well over time — you just have to avoid getting excited when other people are getting excited.”

“What investors then need is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period — or even to look foolish — is also essential.”

“No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”

“You shouldn’t own common stocks if a 50% decrease in their value in a short period of time would cause you acute distress.”

“There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.”

“You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.”

“You’re dealing with a lot of silly people in the marketplace; it’s like a great big casino and everyone else is boozing. If you can stick with Pepsi, you should be OK.”

“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

“Diversification is protection against ignorance. It makes little sense if you know what you are doing.”

“Time is the friend of the wonderful company, the enemy of the mediocre.”

“Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.”

“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

“What an investor needs is the ability to correctly evaluate selected businesses. Note that word ‘selected’: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

“Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a fly epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

“Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it’s the lack of change that appeals to me.”

“If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”

“I call investing the greatest business in the world … because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it.”

“It is not necessary to do extraordinary things to get extraordinary results.”

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

“In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.”

“What the wise do in the beginning, fools do in the end.”

“Loss of focus is what most worries Charlie and me when we contemplate investing in businesses that in general look outstanding. All too often, we’ve seen value stagnate in the presence of hubris or of boredom that caused the attention of managers to wander.”

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

“We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it. In stating this opinion, we define risk, using dictionary terms, as “the possibility of loss or injury.”

“We select such investments on a long-term basis, weighing the same factors as would be involved in the purchase of 100% of an operating business:

(1) favorable long-term economic characteristics;
(2) competent and honest management;
(3) purchase price attractive when measured against the yardstick of value to a private owner; and
(4) an industry with which we are familiar and whose long-term business characteristics we feel competent to judge.”

 

Quotes by Charlie Munger

“It takes character to sit with all that cash and to do nothing. I didn’t get top where I am by going after mediocre opportunities.”

“Those who keep learning, will keep rising in life.”

“You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.”

“If you took our top fifteen decisions out, we’d have a pretty average record. It wasn’t hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor.”

“A great business at a fair price is superior to a fair business at a great price.”

“There are two kinds of businesses: The first earns twelve percent, and you can take the profits out at the end of the year. The second earns twelve percent, but all the excess cash must be reinvested – there’s never any cash. It reminds me of the guy who sells construction equipment – he looks at his used machines, taken in as customers bought new ones, and says “There’s all of my profit, rusting in the yard.” We hate that kind of business.”

“The big money is not in the buying or the selling, but in the waiting.”

“The idea of excessive diversification is madness.”

“If you think your IQ is 160 but it’s 150, you’re a disaster. It’s much better to have a 130 IQ and think it’s 120.”

“Black-Scholes is a know-nothing system. If you know nothing about value – only price – then Black-Scholes is a pretty good guess at what a ninety-day option might be worth. But the minute you get into longer periods of time, it’s crazy to get into Black-Scholes.”

“When any guy offers you a chance to earn lots of money without risk, don’t listen to the rest of his sentence. Follow this, and you’ll save yourself a lot of misery.”

“People calculate too much and think too little.”

“You don’t have to be brilliant, only a little it wiser than the other guys, on average, for a long time.”

“How do some people get wiser than other people? Partly it is inborn temperament. Some people do not have a good temperament for investing. They’re too fretful; they worry too much. But if you’ve got a good temperament, which basically means being very patient, yet combine that with a vast aggression when you know enough to do something, then you just gradually learn the game, partly by doing, partly by studying. Obviously, the more hard lessons you can learn vicariously, instead of from your own terrible experiences, the better off you will be. I don’t know anyone who did it with great rapidity. Warren Buffett has become one hell of a lot better investor since the day I met him, and so have I. If we had been frozen at any given stage, with the knowledge hand we had, the record would have been much worse than it is. so the game is to keep learning, and I don’t think people are going to keep learning who don’t like the learning process.”

“If you don’t get this elementary, but mildly unnatural, mathematics of elementary probability into your repertoire, then you go through a long life like a one–legged man in an ass–kicking contest. You’re giving a huge advantage to everybody else.”

“Beta and modern portfolio theory and the like – none of it makes any sense to me. We’re trying to buy businesses with sustainable competitive advantages at a low, or even a fair, price. How can professors spread this [nonsense that a stock’s volatility is a measure of risk]? I’ve been waiting for this craziness to end for decades. It’s been dented, but it’s still out there. Warren once said to me, “I’m probably misjudging academia generally [in thinking so poorly of it] because the people that interact with me have bonkers theories.”

“It is occasionally possible for a tortoise, content to assimilate proven insights of his best predecessors, to outrun hares that seek originality or don’t wish to be left out of some crowd folly that ignores the best work of the past. This happens as the tortoise stumbles on some particularly effective way to apply the best previous work, or simply avoids standard calamities. We try more to profit from always remembering the obvious than from grasping the esoteric. 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.”

“Someone will always be getting richer faster than you. This is not a tragedy.”

 

Quotes by Seth Klarman

“Buying stocks at an appreciable discount from the value of the underlying business is one strategy that provides a roadmap to successfully navigate not only through good times but also the turmoil. Buying at a discount creates a margin of safety for the investor — room for imprecision, error, bad luck or the vicissitudes of volatile markets and economies.”

“The inability to hold cash and the pressure to be fully invested at all times meant that when the plug was pulled out of the tub, all boats dropped as the water rushed down the drain.”

“Investment success cannot be captured in a mathematical equation or a computer program.”

“Value investors have to be patient and disciplined, but what I really think is you need not to be greedy. If you’re greedy and you leverage, you blow up. Almost every financial blow up is because of leverage.”

“In a rising market, everyone makes money and a value philosophy is unnecessary. But because there is no certain way to predict what the market will do, one must follow a value philosophy at all times.”

“Investment success cannot be captured in a mathematical equation or a computer program.”

“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.”

“Pressure to produce over the short term – a gun to the head of everyone – encourages excessive risk taking which manifests itself in several ways – fully invested posture at all times, the use of leverage, and a market centric orientation that makes it difficult to stand apart from the crowd and take a long term perspective.”

“A commodity doesn’t have the same characteristics as a security, characteristics that allow for analysis. Other than a recent sale or appreciation due to inflation, analyzing the current or future worth of a commodity is nearly impossible.”

“To achieve long-term success over many financial market and economic cycles, observing a few rules is not enough. Too many things change too quickly in the investment world for that approach to succeed. It is necessary instead to understand the rationale behind the rules in order to appreciate why they work when they do and don’t when they don’t.”

“In a crisis, stocks of financial companies are great investments, because the tide is bound to turn. Massive losses on bad loans and soured investments are irrelevant to value; improving trends and future prospects are what matter, regardless of whether profits will have to be used to cover loan losses and equity shortfalls for years to come.”

“If you can remember that stocks aren’t pieces of paper that gyrate all the time –they are fractional interests in businesses — it all makes sense.”

“Loss avoidance must be the cornerstone of your investment philosophy.”

“Almost every financial blow up is because of leverage.”

“As value investors, our business is to buy bargains that financial market theory says do not exist. We’ve delivered great returns to our clients for a quarter century-a dollar invested at inception in our largest fund is now worth over 94 dollars, a 20% net compound return. We have achieved this not by incurring high risk as financial theory would suggest, but by deliberately avoiding or hedging the risks that we identified.”

“You must buy on the way down. There is far more volume on the way down than on the way back up, and far less competition among buyers. It is almost always better to be too early than too late, but you must be prepared for price markdowns on what you buy.”

“Typically, we make money when we buy things. We count the profits later, but we know we have captured them when we buy the bargain.”

“I think Buffett is a better investor than me because he has a better eye toward what makes a great business. And when I find a great business I’m happy to buy it and hold it. Most businesses don’t look so great to me.”

“The best protection against risk is knowing what you are doing.”

“When all feels calm and prices surge, the markets may feel safe; but, in fact, they are dangerous because few investors are focusing on risk.”

“One thing I want to emphasize is that, like any human being, we can discuss our view of the economy and the market. Fortunately for our clients, we don’t tend to operate based on the view. Our investment strategy is to invest bottom up, one stock at a time, based on price compared to value. And while we may have a macro view that things aren’t very good right now – which in fact we feel very strongly we will put money to work regardless of that macro view if we find bargains. So tomorrow, if we found half a dozen bargains, we would invest all our cash.”

“The focus of most investors differs from that of value investors. Most investors are primarily oriented toward return, how much they can make and pay little attention to risk, how much they can lose. ”

“Value investing is simple to understand but difficult to implement. Value investors are not super sophisticated analytical wizards who create and apply intricate computer models to find attractive opportunities or assess underlying value. The hard part is discipline, patience and judgement. Investors need discipline to avoid the many unattractive pitches that are thrown, patience to wait for the right pitch, and judgement to know when it is time to swing. ”

“We regard investing as an arrogant act; an investor who buys is effectively saying that he or she knows more than the seller and the same or more than other prospective buyers. We counter this necessary arrogance (for indeed, a good investor must pull confidently on the trigger) with an offsetting does of humility, always asking whether we have an apparent advantage over other market participants in any potential investment. If the answer is negative, we do not invest. ”

“In a stormy market, the value investing discipline becomes crucial, because it helps you find your bearings when reassuring landmarks are no longer visible. In a market downturn, momentum investors cannot find momentum, growth investors worry about a slowdown, and technical analysts don’t like their charts. But the value investing discipline tells you exactly what to analyze, price versus value, and then what to do, buy at a considerable discount and sell near full value. And, because you cannot tell what the market is going to do, a value investment discipline is important because it is the only approach that produces consistently good investment results over a complete market cycle. ”

“There is… a limit on the likely population of value investors because value investing involves more patience and discipline than many people can muster. ”

“Markets are inefficient because of human nature – innate, deep-rooted, permanent. People don’t consciously choose to invest with emotion – they simply can’t help it. Investors cannot change their stripes and will always exhibit characteristics of greed and fear. ”

“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions. Success in the market leads to excess, as bystanders are lured in by observing their friends and neighbors becoming rich, as naysayers are trounced by zealous participants, and as the effects of leverage reinforce early successes. Then, eventually, and perhaps after more time than contrarians would like, the worm turns, the last incremental buyer gets in, the last speculative dollar is borrowed and invested, and someone decides or is forced to sell. Things quickly work in reverse, as leveraged investors receive margin calls and panicked investors dump their holdings regardless of price. Then, the wisdom of caution is once again evident, as not losing money becomes the watchword of the day. ”

“In a rising market, everyone makes money and a value philosophy is unnecessary. But because there is no certain way to predict what the market will do, one must follow a value philosophy at all times. By controlling risk and limiting loss through extensive fundamental analysis, strict discipline, and endless patience, value investors can expect good results with limited downside.

You may not get rich quick, but you will keep what you have, and if the future of value investing resembles its past, you are likely to get rich slowly. As investment strategies go, this is the most that any reasonable investor can hope for.

The real secret to investing is that there is no secret to investing. Every important aspect of value investing has been made available to the public many times over, beginning in 1934 with the first edition of Security Analysis. That so many people fail to follow this timeless and almost foolproof approach enables those who adopt it to remain successful.

The foibles of human nature that result in the mass pursuit of instant wealth and effortless gain seem certain to be with us forever. So long as people succumb to this aspect of their natures, value investing will remain, as it has been for 75 years, a sound and low-risk approach to successful long-term investing.”

“While it is always tempting to try to time the market and wait for the bottom to be reached (as if it would be obvious when it arrived), such a strategy has proven over the years to be deeply flawed. Historically, little volume transacts at the bottom or on the way back up and competition from other buyers will be much greater when the markets settle down and the economy begins to recover. Moreover, the price recovery from a bottom can be very swift. Therefore, an investor should put money to work amidst the throes of a bear market, appreciating that things will likely get worse before they get better. ”

“Those who reflect and hesitate make far less in a bull market, but those who never question themselves get obliterated when the bear market comes. ”

“A bargain price is necessary but not sufficient for making an investment, because sometimes securities that seem superficially inexpensive really aren’t. ‘Value traps’ are cheap for a reason – perhaps an inept and entrenched management, a poor history of capital allocation, or assets whose value is in inexorable decline. A catalyst for the realization of underlying value is something we seek, but we will also make investments without a catalyst when the price is sufficiently compelling.”

“It is easy to find middling opportunities but rare to find exceptional ones. ”

“If your competitors are not paying attention to, or indeed are dumping, Greek equities or U.S. housing debt, these asset classes may be worth your attention, regardless of the currently poor fundamentals that are driving others’ decisions. Where to best apply your focus and skills depends partially on where others are applying theirs. When observing your competitors, your focus should be on their approach and process, not their results. Short-term performance envy causes many of the shortcomings that lock most investors into a perpetual cycle of underachievement. You should watch your competitors not out of jealousy, but out of respect, and focus your efforts not on replicating others’ portfolios, but on looking for opportunities where they are not.”

 

Quotes by Peter Lynch

“When stocks are attractive, you buy them. Sure, they can go lower. I’ve bought stocks at $12 that went to $2, but then they later went to $30. You just don’t know when you can find the bottom.”

“There is always something to worry about. Avoid weekend thinking and ignoring the latest dire predictions of the newscasters. Sell a stock because the company’s fundamentals deteriorate, not because the sky is falling.”

“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.”

“What makes stocks valuable in the long run isn’t the market. It’s the profitability of the shares in the companies you own. As corporate profits increase, corporations become more valuable and sooner or later, their shares will sell for a higher price.”

“The list of qualities (an investor should have) include patience, self-reliance, common sense, a tolerance for pain, open-mindedness, detachment, persistence, humility, flexibility, a willingness to do independent research, an equal willingness to admit mistakes, and the ability to ignore general panic.”

“In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”

“A price drop in a good stock is only a tragedy if you sell at that price and never buy more. To me, a price drop is an opportunity to load up on bargains from among your worst performers and your laggards that show promise. If you can’t convince yourself “When I’m down 25 percent, I’m a buyer” and banish forever the fatal thought “When I’m down 25 percent, I’m a seller,” then you’ll never make a decent profit in stocks.”

“Just because you buy a stock and it goes up does not mean you are right. Just because you buy a stock and it goes down does not mean you are wrong.”

“There’s lots of stocks out there and all you need is a few of ’em. That’s been my philosophy.”

“I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.”

“I’ve always said, the key organ here isn’t the brain, it’s the stomach. When things start to decline – there are bad headlines in the papers and on television – will you have the stomach for the market volatility and the broad-based pessimism that tends to come with it?”

“Hold no more stocks than you can remain informed on.”

“There’s no shame in losing money on a stock. Everybody does it. What is shameful is to hold on to a stock, or worse, to buy more of it when the fundamentals are deteriorating.”

“You have to let the big ones make up for your mistakes.”

“Investing in stocks is an art, not a science, and people who’ve been trained to rigidly quantify everything have a big disadvantage.”

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

“Stocks are a safe bet, but only if you stay invested long enough to ride out the corrections.”

“In the long run, a portfolio of well chosen stocks and/or equity mutual funds will always outperform a portfolio of bonds or a money-market account. In the long run, a portfolio of poorly chosen stocks won’t outperform the money left under the mattress.”

“Absent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they’re going to be higher or lower in two to three years, you might as well flip a coin to decide.”

“Avoid hot stocks in hot industries.”

“The typical big winner in the Lynch portfolio generally takes three to ten years to play out.”

 

Quotes by Li Lu

“Management is always part of the equation of making the company successful, so the quality of management always matters.”

“Investing is about intellectual honesty. You want to know what you know. You want to know, mostly, what you don’t know.”

“The game of investing is a process of discovering who you are, what you’re interested in, what you’re good at, what you love to do, then magnifying that until you gain a sizable edge over all the other people.”

“In my view, the biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital. Not only is the mere drop in stock prices not risk, but it is an opportunity. Where else do you look for cheap stocks?”

 

Quotes by Joel Greenblatt

“The secret to investing is to figure out the value of something – and then pay a lot less.”

“The more confidence I have in each one of my stock picks, the fewer companies I need to own in my portfolio to feel comfortable.”

“Remember, it’s the quality of your ideas not the quantity that will result in the big money.”

“The big picture is: the main thing you should be concerned about in the future are incremental returns on capital going forward. As it turns out, past history of a good return on capital is a good proxy for this but obviously not foolproof. I think this is an area where thoughtful analysis can add value to any simple ranking/screening strategy such as the magic formula. When doing in depth analysis of companies, I care very much about long term earnings power, not necessarily so much about the volatility of that earnings power but about my certainty of “normal” earnings power over time.”

“Value investing strategies have worked for years and everyone’s known about them. They continue to work because it’s hard for people to do, for two main reasons. First, the companies that show up on the screens can be scary and not doing so well, so people find them difficult to buy. Second, there can be one-, two- or three-year periods when a strategy like this doesn’t work. Most people aren’t capable of sticking it out through that.”

“There’s a clarity that comes with great ideas: You can [easily and simply] explain why something’s a great business, how and why it’s cheap, why it’s cheap for temporary reasons and how, on a normal basis, it should be trading at a much higher level. You’re never sitting there on the 40th page of your spreadsheet, as Buffett would say, agonizing over whether you should buy or not.”

“So one way to create an attractive risk/reward situation is to limit downside risk severely by investing in situations that have a large margin of safety. The upside, while still difficult to quantify, will usually take care of itself. In other words, look down, not up, when making your initial investment decision. If you don’t lose money, most of the remaining alternatives are good ones.”

“I still believe that for good business analysts a concentrated portfolio is a good strategy combined with a long term horizon. Once again, the secret to success in following the formula strategy is patience, a quality in short supply for both professionals and individual investors alike. I think investors should have a large portion of their assets in equities over time.”