Sometimes, the best investing advice can be encapsulated within a sentence or two. Following are some great investing quotes to live by; may they help you to ignore the noise, avoid the temptation of being lured into 'the next big thing', and stop worrying about the 'impending disaster' that always seems to be on the financial media's radar.
1. "Be fearful when others are greedy, and greedy when others are fearful" – Warren Buffett
This is easier said than done. Nevertheless, investors should be prepared to remain patient on the sidelines when valuations are soaring beyond logic, and buy when others are panicking around them.
2. "The stock market is filled with individuals who know the price of everything, but the value of nothing" – Phillip Fisher
It's easy to see what a company's share price is doing, but knowing what the shares are actually worth requires deeper research and understanding. Don't be fooled into thinking that a falling share price automatically means the business is struggling, nor does a soaring share price automatically reflect a booming business.
3. "If you don't study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards" – Peter Lynch
Investing in the share market can be as risky as gambling if you don't take the time to research a business and its prospects, or jump blindly into a company's shares without knowing its worth.
4. "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" – Peter Lynch
Even the best investors in the world make mistakes (and lots of them). Don't be disheartened by your own mistakes, and try to learn from them.
5. "The individual investor should act consistently as an investor and not as a speculator" – Benjamin Graham
Investing in the share market shouldn't be thought of as a way to get rich quickly. Investment decisions should be based on real facts and proper analysis. Plus, investors should only ever invest an amount of money that they can comfortably afford to lose.
6. "How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." – Robert G. Allen
Investors should always have some cash spare, so don't forgo a savings account completely. But investors also need to be willing to take some risk to generate higher returns in the long-run, and truly benefit from the powers of compounded returns.
7. "Cash combined with courage in a time of crisis is priceless" – Warren Buffett
As per the above, investors should always hold some cash in case of an emergency. But similarly, holding some cash is necessary to take advantage of bargain opportunities in times of crisis.
8. "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
The true benefits from investing are realised over the very-long term through compounded returns.
9. "Investing is the intersection of economics and psychology" – Seth Klarman
Share prices often deviate from their true worth. It's the investor's job to distinguish which ones are undervalued, fairly valued, or overvalued.
10. "Investing is simple. It's the financial industry that works hard to make it complex!" – Robert Rolih
Unfortunately, there is an endless amount of jargon that gets used in the financial industry, and more is being created every year as new financial instruments are created. Investors should aim to avoid investments they don't understand, and keep their investing process relatively simple.
As an example, businesses such as Wesfarmers Ltd (ASX: WES) and Woolworths Limited (ASX: WOW) are fairly easy to understand. On the other hand, a company such as Insurance Australia Group Ltd (ASX: IAG) may be more complex for a beginner investor to grasp.
