Many of us are inspired by great quotations. And you can find plenty of them related to investing. Let's take a look at some of these quotes to determine what they may have to offer us.
- "The four most dangerous words in investing are: This time it's different." -- Sir John Templeton, legendary investor and philanthropist.
Templeton points out that many investors tend to repeat their mistakes -- or the mistakes of others. For example, has the Enron debacle taught us to not put too much money in company stock? After all, Enron employees who participated in their company's 401(k) plan had invested about 58 percent of their assets in Enron stock when it lost almost all its value during 2001. Yet today, many people are still "overloading" their 401(k)s with company stock.
Of course, Enron was an extreme example. Still, any company's stock can fluctuate in value. And if these fluctuations are significant and occur at the wrong time -- such as when you're retired and want to start taking distributions from your 401(k) -- you could take some "hits."
As Templeton said, simply hoping that bad things won't happen again is not a sound investment strategy. Pay attention to mistakes -- and learn from them.
- "The individual investor should act consistently as an investor and not as a speculator." -- Benjamin Graham, author and economist.
An investor looks for good investments that are reasonably priced, while a speculator "bets" on risky vehicles. An investor holds high-quality stocks for the long term and anticipates gradual price appreciation. But speculators hope for rapid gains, so they can sell quickly and move on to their next gamble. Sometimes they win and sometimes they lose.
If you want to achieve your long-term financial goals, you might want to heed Graham's advice: Be an investor, not a speculator.
- "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." -- Warren Buffett, well-known investor.
How do people act greedy? By chasing after "hot" stocks in hopes of ever-higher gains -- even if the stock prices are not supported by earnings and other key fundamentals. How do investors express their fear? By trying to "cut their losses" through selling stocks when the price drops -- even if the stocks still offer good long-term growth potential.
As his quote suggests, Buffett has achieved his tremendous success by doing just the opposite. If he can find no good reasons for a stock to be "hot," he probably won't buy it. And if a good stock's price is temporarily depressed, he'll jump in enthusiastically, because he recognizes a bargain.
In short, Buffett likes to "buy low and sell high." And that's good advice for all of us.
Going beyond the quotes
As we've seen, some investment-related quotes can impart genuine wisdom. But you can't always make investment decisions just on the basis of pithy sayings.
Your financial picture is not exactly like anyone else's, so you will need to create investment strategies that are tailored to your needs, goals and preferences.
- "It is so difficult to make these business decisions. I do not know what is good, or what is wrong." -- Zane Grey, former Rim Country resident and famous Western author.
Listen to the words of experience -- but let your own voice be your true guide.
Ross Hage is a licensed investment representative with the firm of Edward Jones. For more information, call (928) 468-2281.