You might find the thought of managing an investment daunting, especially as a beginner. Leaving the perceived safety of an easy access savings account for the volatility of the stock market does come with risks attached, but the potential for higher returns is greater too.
Since the Dutch East India Company first traded publicly back in 1611, there has been no shortage of investors, nor of experts keen to share their wisdom.
From the “Oracle of Omaha” to Vanguard founder Jack Bogle and finance gurus like Carl Icahn and John Kenneth Galbraith, here are some important investment lessons to learn from the masters.
On the importance of patience
1. “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes” – Warren Buffett
It’s only right that we start with Berkshire Hathaway CEO and Forbes’ fifth richest man in the world, Warren Buffett.
The legend goes that Buffett bought his first stock aged just 11 and now, aged 93, he has an estimated wealth of $98 billion (around £81 billion).
The above comment on the value of investing long-term is just one of many famous quotes Buffett has shared on the importance of investing for the long term.
See also:
2. “The stock market is a device to transfer money from the impatient to the patient”
3. “Successful investing takes time, discipline, and patience”
4. “The most important quality for an investor is temperament, not intellect.”
At Jane Smith Financial Planning, the investment strategy we put in place for you will be long-term, and that means patience is key.
5. “Invest for the long haul. Don’t get too greedy and don’t get too scared” – Shelby M.C. Davis
Another American philanthropist and investor, Davis echoes the sentiments of Warren Buffett, who also said:
6. “Be fearful when others are greedy, and greedy when others are fearful”
On not chasing trends or following the crowd
7. “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioural discipline that are likely to get you where you want to go” – Benjamin Graham
Benjamin Graham was a London-born American, economist, professor, and investor known as the “Father of Value Investing.”
He understood that chasing huge investment returns wasn’t a mark of success but a sign of impatience. Rather than chasing trends, you should look to achieve your goal, within your chosen time frame, and take only the minimum amount of risk.
8. “The function of economic forecasting is to make astrology look respectable” – John Kenneth Galbraith
9. “The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has” – Jack Bogle
Markets fluctuate daily and short-term periods of volatility are to be expected, but that doesn’t mean you need to watch the markets at all times.
Your investment plan is long-term specifically to ride out periods of volatility and keep you on track to your goals. Succumbing to herd mentality and chasing the pack into investments not aligned with your risk profile is a recipe for disaster.
As the Wall Street titan Carl Icahn once said:
10. “When most investors, including the pros, all agree on something, they’re usually wrong” – Carl Icahn
On riding out market volatility
11. “The only reason to sell a stock is to buy other, more attractive stocks. If you can’t find more attractive stocks, hold on to what you have” – Sir John Templeton
An American-born British fund manager, philanthropist, and pioneer of emerging market investing, the Templeton Foundation confirms, that Sir John was once named “arguably the greatest global stock picker of the century.”
His advice on the importance of non-emotional decision-making, and avoiding knee-jerk reactions, remains vital, decades after it was originally given.
12. “The intelligent investor is a realist who sells to optimists and buys from pessimists” – Benjamin Graham
13. “You make most of your money in a bear market, you just don’t realize it at the time” – Shelby Cullom Davis
When you panic sell shares during a market downturn, you turn a paper loss into a real one. This can have huge consequences throughout a long-term investment.
It’s likely to be more beneficial to keep hold of shares when markets become volatile, ensuring you’re there to see the benefits of rising prices when markets recover.
14. “Rule number one is never losing money. Rule number two is never forget rule number one” – Warren Buffett
On risk
Investment carries risk but with it the chance of greater rewards.
If you are new to investing, remember that we’re on hand to help you think about your long-term goals, your timescales, and your capacity for loss.
We can also help you to think about your risk profile. And remember (to give the final word to the Oracle of Omaha):
15. “Risk comes from not knowing what you are doing” – Warren Buffett
Get in touch
If you would like help with your investments, so that you know what you’re doing going forward, we’re here for you. Please contact us on info@janesmithfinancial.com or call 01234 713131.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
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