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30 Investing Quotes That Have Shaped My Investment Philosophy

Alvin Chow
Alvin Chow

Investing quotes can convey a lot of wisdom in a few words. They are useful because they can guide us in making good investment decisions. I wanted to pick the meaningful quotes that have shaped my investment philosophy rather than merely regurgitate the popular ones. I have compiled 30 of them and I hope you would find them useful.

#1 – “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

Investors often get fixated about the accuracy rate of an investing strategy – what’s the percentage of winning stocks? They think that a good strategy is one that has 70% or more winning stocks. This is not true. It is the degree of win that matters.

Here’s an example: Assuming you own a portfolio of 10 stocks with equal weight. You can end up with a loss if you had 9 stocks make 5% each (+45%) and 1 stock that losing 50%. The hit rate is a red herring. On the contrary, you can have a profitable portfolio if 1 stock made 100% while the remaining 9 stocks have lost 10% each (-90%).

Hence, it is not how often you are right, but how much you make when you are right matters more.

#2 – “I’m here to tell you I was a pig. And strongly believe the only way to make long-term returns in our business that are superior is by being a pig. I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept everywhere.” ~ Stanley Druckenmiller

Stanley Druckenmiller was the right hand man to George Soros and had one of the best records as a hedge fund manager. One of the things that he had learned from Soros was to put a lot of money behind a high conviction trade. Being a pig means taking a large position.

This is related to the previous quote whereby you want large wins rather than high frequency of wins . You would also want to put as much money as possible in that large win to get outsized returns.

Druckenmiller also said, “Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular… As far as Soros is concerned, when you’re right on something, you can’t own enough.”

#3 – “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” ~ Peter Lynch

Peter Lynch held one of the best investment returns in the mutual fund industry but he retired a long time ago. He has cautioned about market timing on several occasions.

Market timing is alluring because it makes you feel smart to sell before prices come down and avoiding losses as a result. But few can do this well over a long period of time. Most would end up mistiming the markets instead. There would be a lot of hits and misses such that one might have done better holding onto the investments and doing nothing.

#4 – “We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know.” – John Kenneth Galbraith

This is related to the previous quote – it is hard to get predictions correct. But some investors just love to dish out predictions. You can find many of them on the media.

I remember there was a popular Taiwanese stock market forecaster who once acknowledged that he doesn’t invest, because it clouded his judgment of the markets.

I’d say that’s a lack of skin in the game – he probably couldn’t trust his money to bet on his own predictions. He is smart to do so.

#5 – “Doubt is an uncomfortable condition, but certainty is a ridiculous one.” ~ Voltaire

Humans crave certainties and hate uncertainties. Guess which does the markets offer? Yes, uncertainties.

This is one of the reasons why investing is so difficult – we need to make decisions without knowing what is going to happen next.

To alleviate the lack of control, investors tend to want to listen to market outlook and predictions. However, this leads to a false sense of confidence because most predictions are going to be wrong.

You will always have to accept the uncertainties when you make an investment decision. It is impossible to wait for a 100% confidence moment.

#6 – “October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” ~ Mark Twain

We have our own superstitions on certain things at certain times.

Calendar effect is one example of superstitions in investing. You have probably heard of ‘sell in May and go away’.

Some investors believe that there are better months to buy and sell stocks. The reality is that there are no reliable patterns that you can rely upon to build your wealth consistently.

#7 – “If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re mis-informed.”

This is not an investing quote per se. And we do not know who was the originator for this quote. The internet claims that it was Mark Twain but there’s no proof he has said that. Regardless, this is an applicable quote to investing.

We have to understand that “the news” makes money by selling ads and they can charge higher fees if they get more eyeballs. This leads to sensationalised headlines that may affect you emotionally and result in irrational decisions while investing.

Hence, be careful about where you get your investment information. If you have to choose between uninformed and misinformed, the former is the lesser of two evils.

#8 – “You don’t trade the markets, you trade your beliefs about the markets.” ~ Van Tharp

We don’t see the world as is. We see the world through our own lenses which are tainted with our life experiences and beliefs.

Similarly, we think that we are investing objectively but the truth is far from it – we often inject our own beliefs onto the markets. Some of our beliefs can be wrong and we need to keep challenging them to get closer to the truth.

#9 – “The first principle is that you must not fool yourself — and you are the easiest person to fool.” ~ Richard Feynman

We are our greatest liars.

We tell ourselves bullshit stories everyday. We justify why we hold on to our losing stocks although we already know they were mistakes. The truth is that we don’t want to realise the losses because it is painful to do so.

We believe in stories about why an investment should do well because we want to believe that we can make a lot of money and so we turn a blind eye to any potential risks.

Yes, we lie to ourselves all the time. It is a coping mechanism in our DNA.

#10 – “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” ~ Mark Twain

This is also known as overconfidence bias. Sometimes we think that we are right such that we don’t entertain any alternatives.

The future is uncertain and every possible outcome has a variable probability of happening.

Overconfidence prevents us from realising that we could be wrong and it would be disastrous if we cannot accept the consequences.

#11 – “Markets can stay irrational longer than you can stay solvent.” ~ John Maynard Keynes

It isn’t easy to be a contrarian.

Sometimes you may know that the market has gone crazy but it doesn’t make sense to bet against it. This is because the craze can last a lot longer than you thought it could.

It is important not to short a market just because you think that it has gone too high. For all you know, it could go even higher and wipe out your capital.

#12 – “Any year that you don’t destroy one of your best-loved ideas is probably a wasted year.” ~ Charlie Munger

We mentioned previously that we invest based on our beliefs about the markets.

The problem is, we are very likely to hold false beliefs and they prevent us from getting close to the truth, and the results we want.

Hence, we must spend enough time and effort to re-examine our well-held beliefs and destroy them to make progress.

#13 – “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” ~ Warren Buffett

We may think that investing is about outsmarting others. And it is one of the reasons why it feels so good to make money – we feel we are smarter than other investors.

But investing is more about EQ than IQ.

Charlie Munger said it well, “a lot of people with high IQs are terrible investors because they’ve got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success.”

#14 – “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.” ~ Charlie Munger

There’s a wise Hokkien saying, “强就好,不要假强”, which translates to, “it is advantageous to be smart but don’t be too smart for your own good”.

Investing is about keeping to what you know and not trying to do spectacular things. It is not about pleasing your ego. Avoid doing stupid things that put your capital in jeopardy.

#15 – “Know your circle of competence, and stick within it. The size of that circle is not very important; knowing its boundaries, however, is vital.” ~ Warren Buffett

Investors with high IQ tend to think they know everything. But no one is able to hold all the world’s knowledge and information in one’s head.

Hence, knowing where that knowledge ends is an important humble advantage – don’t invest in things which you have less understanding than other investors. Don’t compete in areas where you have low chances of success. Only invest in things that you have an advantage over the others. It is harder to do than you think.

#16 – “We have three baskets: in, out, and too tough. … We have to have a special insight, or we’ll put it in the “too tough” basket.” ~ Charlie Munger

This is a practical way to determine if an investment is within your circle of competence. If it is too tough, don’t try to figure it out. Accept that you don’t understand, chuck it in the “too tough” pile and move on.

#17 – “There’s a quick and easy way to test whether an activity involves skill: ask whether you can lose on purpose.” ~ Michael Mauboussin

This quote continues with; “investing is very interesting because it is difficult to build a portfolio that does a lot better than the benchmark. But it is also actually very hard, given the parameters, to build a portfolio that does a lot worse than the benchmark. What that tells you is that investing is pretty far over to the luck side of the continuum.”

Investing is part luck and part skill, which complicates things – you can do the right thing and still lose money. You can also make a random investment and make money. It is very hard to link the cause and effect, and investors often draw the wrong conclusions.

#18 – “We have no control over outcomes, but we can control the process. Of course, outcomes matter, but by focusing our attention on process, we maximize our chances of good outcomes.” ~ Michael Mauboussin

Investing involves luck and hence focusing on outcomes isn’t going to help us repeat our successes in the future (you can get unlucky).

We should instead invest according to our process. The outcomes can fluctuate between good and bad but eventually it would gravitate to the average positive results, as long as we act consistently.

#19 – “For the perishable, every additional day in its life translates into a shorter additional life expectancy. For the nonperishable, every additional day may imply a longer life expectancy.” ~ Nassim Taleb

This is also known as the Lindy Effect.

It is very applicable in investing and hence the cliche ‘invest for the long term’ exists.

But to be able to stay invested in the long term also means that you cannot afford to blow up your investment capital. To do that, you need to avoid making investments that may lead to catastrophic losses.

Taleb added, “chess grandmasters usually win by not losing; people become rich by not going bust.”

#20 – “I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.” ~ George Soros

No investor can be right all the time. We need to admit our mistakes when we are wrong.

Confucius said, “a man who committed a mistake and doesn’t correct it, is committing another mistake.” It is about preserving our capital and not let the losses compound until they consume the entire capital. We can always fight another day as long as we have our capital. Preserve it.

#21 – “Go for a business any idiot can run because sooner or later, any idiot probably is going to run it.”

We aren’t sure who said this.

It seems to be a common adage which Warren Buffett and Peter Lynch had used in their literature. It is normal to want to invest in excellent management. But it is better to invest in an easy business.

Buffett has another phrase, “when a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.” Excellent management cannot do much to turn a difficult business around while an idiot is unlikely to ruin an easy business by far.

#22 – “The fine art of Dhandho is the low-risk, high-uncertainty combination, which gives us our most sought after coin-toss odds. Heads, I win; tails, I don’t lose much!” ~ Monish Pabrai

Monish Pabrai painted these scenarios that are likely to lead to a depressed stock price:

  • High risk, low uncertainty
  • High risk, high uncertainty
  • Low risk, high uncertainty
  • Low risk, low uncertainty

He said that the best investment is in the low-risk, high-uncertainty combination. This is also the most misunderstood investments because many mistaken high uncertainty as risk.

But risk and uncertainty are separate. Risk is the chance that you can lose a lot of money while uncertainty is good because it can surprise you with a big upside.

#23 – “If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” ~ John Bogle

Markets have bull and bear runs. We don’t mind bull runs because we make money. We hate bear markets because we see our wealth dwindle.

But accepting volatility and staying on course are part of the investing game. We tend to sell at low prices if we simply seek to avoid pain. If we buy high and sell low, how can we ever do well in our investments?

#24 – “The four most dangerous words in investing are: ‘this time it’s different.” ~ Sir John Templeton

From time to time, investors will say ‘this time it’s different.”

During the dotcom period, many believed that the new era has arrived and piled on tech stocks like there’s no tomorrow. Market crashed.

During 2007, investors believe that inflation was getting out of hand and invested in commodities. Market crashed.

In 2017, investors thought that the world is different because bitcoin is going to replace our monetary system. Cryptocurrencies crashed.

History doesn’t repeat but it rhymes. The world changes but human behaviour remains consistent.

#25 – “When you look at the past, the past will always be deterministic, since only one single observation took place.” ~ Nassim Taleb

“In the business world, the rearview mirror is always clearer than the windshield,” said Warren Buffett.

There’s only one path in history because we knew which path it has taken. But going forward, there can be a million paths that the future may take. How do we know which scenario will unfold?

We must avoid survivorship bias in investing, extrapolating the past to determine the future, when an alternative history could have happened.

#26 – “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

Some investors approach the markets as though they are casinos. They like the excitement by making bets on the directions of securities. But good investing is boring.

It is feels like work. You have to do research and exhaust mental energy to analyse investments. Sometimes you have to do nothing when there’re no compelling investments.

How many would not buy anything after putting in a lot of work? We may also expect our stocks to go up faster than what the market have in mind. The prices do not move much most of the time and they are really boring to watch in the short term.

#27 – “Even the intelligent investor is likely to need considerable willpower to keep from following the crowd.” ~ Benjamin Graham

We know that the crowd can be wrong when a mania is brewing in the markets. But it is very hard not to follow the craze because every other investor seems to be doing very well. You might not be able to resist if you keep underperforming and eventually jump onto the bandwagon.

#28 – “The investor’s chief problem—and his worst enemy—is likely to be himself. In the end, how your investments behave is much less important than how you behave.” ~ Benjamin Graham

We are our greatest enemies.

Our investment results are determined by our investment behaviour. Our behaviour is a reflection of our beliefs and thoughts. We spend too much time commenting about the markets and spend too little time reflecting upon our actions.

Adopt the right beliefs and be disciplined to act on them, ignore the volatility in the markets and stay on course for the long term.

#29 – “To the man with a hammer, the world looks like a nail.” ~ Charlie Munger

Charlie Munger believes multi-disciplinary thinking is an ingredient for successful investing. This means you need to understand the big ideas from each major field.

Sometimes the best way to analyse an investment doesn’t come from finance or economics. It may come from psychology or history or even biology (and many others). Hence, your investment ability will be limited if you only have one model to use.

#30 – “Absorb what is useful, discard what is useless and add what is specifically your own.” ~ Bruce Lee

Not an investing quote but highly applicable.

There are different ways to invest and often they contradict one another. You have to learn from others because no one is so smart in figuring out everything by himself.

But it is important not to blindly follow others too. Overtime, you have to discern what is useful to add to your investment style.

That’s 30 wise quotes that I’ve found useful. But you make up your own mind – absorb what is useful and discard what’s not. All the best.

Alvin Chow
Alvin Chow
CEO of Dr Wealth. Built a business to empower DIY investors to make better investments. A believer of the Factor-based Investing approach and runs a Multi-Factor Portfolio that taps on the Value, Size, and Profitability Factors. Conducts the flagship Intelligent Investor Immersive program under Dr Wealth. An author of Secrets of Singapore Trading Gurus and Singapore Permanent Portfolio. Featured on various media such as MoneyFM 89.3, Kiss92, Straits Times and Lianhe Zaobao. Given talks at events organised by SGX, DBS, CPF and many others.
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1 thought on “30 Investing Quotes That Have Shaped My Investment Philosophy”

  1. Thank you for your article Alvin! Some quotes are just brilliant. I especially like the quote number 8. I think that it is a good one to “absorb”. Currently, there is so much research and innovation happening in behavioural finance. Moreover, an increasing number of companies are using market sentiments in their trading strategies. Thus, I do believe that this quote is going to become increasingly important.
    To complete the quote number 15, Warren Buffett also said to “Never invest in a business you cannot understand”. It is definitively a good piece of advice, but it may lead to missing some opportunities. In the case of Warren Buffett, he missed opportunities with Google and Amazon stocks because of this motto. So I would rather say “Learn about the businesses you don’t understand, and then decide whether to invest”.

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