Top 5 investment lessons from Legends

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1. “The most important quality for an investor is temperament, not intellect.”

— Warren Buffett, CEO of Berkshire Hathaway

Often, emotions influence trading activity. Consider how investors traded 10x more in the first quarter of 2020 than in 2009.

Yet, in spite of extreme investor fear, the S&P 500 has proven resilient. The index had positive performance in 32 of the last 42 years.

2. “The individual investor should act consistently as an investor and not as a speculator.”

— Benjamin Graham, author of The Intelligent Investor

Benjamin Graham, the father of value investing, had an enormous influence on Warren Buffett. One of his many core insights includes recognizing the difference between an investor and a speculator:

  • Investor: Focused on safety of principal and reasonable return.
  • Speculator: At risk of losing potentially the entire principal.

Rather than seeing an investment as simply a ticker symbol, Graham says, think of an investment like having a partial ownership in a business.

When investors think like an owner, they look for the intrinsic value of the company in the long term, which can compound in value over time.

TimeMonthly ContributionAnnual ReturnInterest Earned on Investments
Year 1$2007%$14
Year 11$2007%$231

In a relatively short period of time, the investor is earning $231 on a $200 monthly contribution.

3. “The biggest risk of all is not taking one.”

— Mellody Hobson, co-CEO of Ariel Investments

Mellody Hobson, co-CEO of Chicago-based Ariel Investments, became president at just 31. Today, Ariel manages over $18 billion in assets. As the head of two major firms (she is also chairwoman of Starbucks), Hobson understood the importance of taking the first step.

We show an example of a potential benefit of starting early:

Investing early is especially timely given today’s inflationary environment. Over time, inflation erodes the value of the dollar and, in turn, a person’s overall wealth.

4. “Time in the market beats timing the market.”

— Ken Fisher, founder of Fisher Investments

If an investor tried to time the market and missed the best performing days over the last century, they would have earned just a fraction of the total returns. Staying invested led to over 17,000% returns, yet missing the 10 best days over each decade led to returns of just 28%:

Even the top investors have trouble timing the market at every turn.

5. “It is better to be roughly right than precisely wrong.”

— John Maynard Keynes, father of modern macroeconomics

When markets are volatile, diversification can help investors temper its effects. Consider the following example that shows the advantages of diversification.

When investors blended stocks and bonds in their portfolios over a one year period, the downside was sharply reduced.

Learning from Historical Insight

The above five investment quotes can arm investors with investing lessons that often are easy to forget:

  • React logically, not emotionally
  • Leverage compound interest
  • Start early
  • Stay invested
  • Diversify

With insights drawn from those who have shaped the financial world, investors can better position their portfolios for success.

1. “The most important quality for an investor is temperament, not intellect.”

— Warren Buffett, CEO of Berkshire Hathaway

Often, emotions influence trading activity. Consider how investors traded 10x more in the first quarter of 2020 than in 2009.

Yet, in spite of extreme investor fear, the S&P 500 has proven resilient. The index had positive performance in 32 of the last 42 years.

2. “The individual investor should act consistently as an investor and not as a speculator.”

— Benjamin Graham, author of The Intelligent Investor

Benjamin Graham, the father of value investing, had an enormous influence on Warren Buffett. One of his many core insights includes recognizing the difference between an investor and a speculator:

  • Investor: Focused on safety of principal and reasonable return.
  • Speculator: At risk of losing potentially the entire principal.

Rather than seeing an investment as simply a ticker symbol, Graham says, think of an investment like having a partial ownership in a business.

When investors think like an owner, they look for the intrinsic value of the company in the long term, which can compound in value over time.

TimeMonthly ContributionAnnual ReturnInterest Earned on Investments
Year 1$2007%$14
Year 11$2007%$231

In a relatively short period of time, the investor is earning $231 on a $200 monthly contribution.

3. “The biggest risk of all is not taking one.”

— Mellody Hobson, co-CEO of Ariel Investments

Mellody Hobson, co-CEO of Chicago-based Ariel Investments, became president at just 31. Today, Ariel manages over $18 billion in assets. As the head of two major firms (she is also chairwoman of Starbucks), Hobson understood the importance of taking the first step.

We show an example of a potential benefit of starting early:

Investing early is especially timely given today’s inflationary environment. Over time, inflation erodes the value of the dollar and, in turn, a person’s overall wealth.

4. “Time in the market beats timing the market.”

— Ken Fisher, founder of Fisher Investments

If an investor tried to time the market and missed the best performing days over the last century, they would have earned just a fraction of the total returns. Staying invested led to over 17,000% returns, yet missing the 10 best days over each decade led to returns of just 28%:

Even the top investors have trouble timing the market at every turn.

5. “It is better to be roughly right than precisely wrong.”

— John Maynard Keynes, father of modern macroeconomics

When markets are volatile, diversification can help investors temper its effects. Consider the following example that shows the advantages of diversification.

When investors blended stocks and bonds in their portfolios over a one year period, the downside was sharply reduced.

Learning from Historical Insight

The above five investment quotes can arm investors with investing lessons that often are easy to forget:

  • React logically, not emotionally
  • Leverage compound interest
  • Start early
  • Stay invested
  • Diversify

With insights drawn from those who have shaped the financial world, investors can better position their portfolios for success.

1. “The most important quality for an investor is temperament, not intellect.”

— Warren Buffett, CEO of Berkshire Hathaway

Often, emotions influence trading activity. Consider how investors traded 10x more in the first quarter of 2020 than in 2009.

Yet, in spite of extreme investor fear, the S&P 500 has proven resilient. The index had positive performance in 32 of the last 42 years.

2. “The individual investor should act consistently as an investor and not as a speculator.”

— Benjamin Graham, author of The Intelligent Investor

Benjamin Graham, the father of value investing, had an enormous influence on Warren Buffett. One of his many core insights includes recognizing the difference between an investor and a speculator:

  • Investor: Focused on safety of principal and reasonable return.
  • Speculator: At risk of losing potentially the entire principal.

Rather than seeing an investment as simply a ticker symbol, Graham says, think of an investment like having a partial ownership in a business.

When investors think like an owner, they look for the intrinsic value of the company in the long term, which can compound in value over time.

TimeMonthly ContributionAnnual ReturnInterest Earned on Investments
Year 1$2007%$14
Year 11$2007%$231

In a relatively short period of time, the investor is earning $231 on a $200 monthly contribution.

3. “The biggest risk of all is not taking one.”

— Mellody Hobson, co-CEO of Ariel Investments

Mellody Hobson, co-CEO of Chicago-based Ariel Investments, became president at just 31. Today, Ariel manages over $18 billion in assets. As the head of two major firms (she is also chairwoman of Starbucks), Hobson understood the importance of taking the first step.

We show an example of a potential benefit of starting early:

Investing early is especially timely given today’s inflationary environment. Over time, inflation erodes the value of the dollar and, in turn, a person’s overall wealth.

4. “Time in the market beats timing the market.”

— Ken Fisher, founder of Fisher Investments

If an investor tried to time the market and missed the best performing days over the last century, they would have earned just a fraction of the total returns. Staying invested led to over 17,000% returns, yet missing the 10 best days over each decade led to returns of just 28%:

Even the top investors have trouble timing the market at every turn.

5. “It is better to be roughly right than precisely wrong.”

— John Maynard Keynes, father of modern macroeconomics

When markets are volatile, diversification can help investors temper its effects. Consider the following example that shows the advantages of diversification.

When investors blended stocks and bonds in their portfolios over a one year period, the downside was sharply reduced.

Learning from Historical Insight

The above five investment quotes can arm investors with investing lessons that often are easy to forget:

  • React logically, not emotionally
  • Leverage compound interest
  • Start early
  • Stay invested
  • Diversify

With insights drawn from those who have shaped the financial world, investors can better position their portfolios for success.