No matter if you are someone who just started on an investing journey or even as a seasoned investor, you may have heard of many different investment quotes that were said by different investing experts in the past. In this article, we are just going to focus on 5 very well-known ones, see what they mean and the wisdom we can learn from them.
1) "The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett, Oracle of Omaha
2) “In the short run, the market is like a voting machine. But in the long run, the market is like a weighing machine--assessing the substance of a company.” – Benjamin Graham, father of value investing & mentor to Warren Buffett
Ignore the short term fluctuations. In the short term, stock prices can be highly volatile as people tend to buy and sell based on fear, hype and emotions. Stock prices of popular companies can keep rallying due to hype. But when people smell fear in the economy or hear bad news, stock prices come tumbling down. However, it is in the long run, those companies that can prove their value by continually performing well, their stock prices will end up much higher.
Short term MSFT share price
Long term MSFT share price
3) “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” – Albert Einstein, genius physicist
Let’s play a simple game. You have 2 choices – 1) Take $1,000,000 right now OR 2) Wait for a penny doubled every day for 30 days, then take that amount at the end. Which would you choose? Maybe you would choose to take that $1,000,000 right now because that is a lot of money and you won’t want to wait. However, option 2 will end up with $5,368,709.12 at the end of 30 days. Five times more! This shows the power of compounding. The penny compounds at a rate of 100% daily for 30 days.
What has this got to do with investing? Well, your money that is invested in a good performing asset does get compounded over time! You will be surprised how much you end up with after a long period of time.
This quote demonstrates the power of compounding and also importance of time and patience. Because compounding takes time! The result is more drastic and obvious when the amount rolls to a bigger one. It’s like rolling snowball down the hill. It starts off small but as it gets bigger, it gets bigger fast!
4) "How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." – Robert G. Allen, author & one of the most influential investment advisors of all time
Do you know how much interest a savings account pays? Usually less than 1%. Even if you have $100,000 in the savings account giving a 1% interest p.a., you will end up with $270,481.38 in… 100 years! That is why, people who aspire to be a millionaire will never “invest” in savings accounts. Rather, they pick great performing assets that can give way higher returns than savings accounts.
5) "Know what you own, and know why you own it." – Peter Lynch, famous investor, mutual fund manager, and philanthropist
Do you buy a particular stock because your friend told you so? Never do that. This is because when the stock price goes up, everything is fine but when it dips 20% you will panic and would not know what to do. Always do your own research on the particular company’s business. Is the business making money? What products do they have? Who are the potential customers? How are the management executing their plans? Etc. That way, if the stock price dips 20%, you will know what is going on and what to do next. If you have no time to do research, then you might be more suitable to just invest in the index fund.
There is just so much wisdom that we can all learn from these famous quotes by famous people! Once we can internalize these wisdom and learnings, we can improve to become a much better investor over time.
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