The wisdom of Britain’s great wartime leader applies to many fields of endeavour
Shane Oliver’s list of great investment quotes: Part Two
20 November 2019 | Shane Oliver
Last month we published Part One of Shane Oliver’s great investment quotes – and quotes for investors. Here is the second tranche of words of wisdom and Oliver’s take on them.
Noise
“Based on personal experience – both as an investor and an expert witness – rarely do more than three or four variables really count. Everything else is noise.” Martin Whitman
The information revolution has given us an abundance of information and opinion about investing. The danger is that information overload adds to uncertainty resulting in excessive caution, an overreaction to news and a focus on things that are of little relevance. So turn down the noise!
Pessimism
“Anything that can go wrong and doesn’t go wrong is just waiting for a much worse time to go wrong.” Anonymous
Those perpetually forecasting a crash in Australian home prices are an example of this sort of thinking. The human brain evolved in a way that it leaves us hardwired to be on the lookout for risks. So, it’s easier to be sceptical and pessimistic. As a result, bad news sells and there seems to be a never-ending stream of warnings of the next disaster. But when it comes to investing, succumbing too much to pessimism doesn’t pay. Since 1900 shares have had positive returns seven years out of 10 in the US and eight years out of 10 in Australia.
Self-perception
“Everyone has the brain power to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and [investment] funds.” Peter Lynch
If you can’t handle volatility in financial markets without making rash decisions, then either they are not for you or you should just take a long-term approach and leave it to someone else.
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” John Bogle
Ditto. Successful investing is all about knowing yourself. Smart investors have an awareness of their weaknesses and seek to manage them. One way to do this is to take a long-term approach. If you want to trade day to day then you need to recognise that this requires a lot of effort, a rigorous process and a willingness to go against the crowd.
“A fanatic is one who can’t change his mind and won’t change the subject.” Winston Churchill
Many let blind faith in a strongly held view (“debt is too high”; “global oil production will soon peak”; “paper money will lead to economic disaster”; “Obamacare will destroy the US economy”; “the digital revolution means this time is different”) drive all their investment decisions. They could get lucky and be right at some point but end up losing a lot of money in the interim.
“If you don’t like something, change it. If you can’t change it, change your attitude.” Dr Mary Angelou
Following on from the last quote, to be a successful investor you need to humble, flexible and accepting of the reality of investment markets. Tilting at windmills doesn’t work.
Life balance
“Money is better than poverty if only for financial reasons.” Woody Allen
Classic Woody. But he’s definitely right.
“Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.” Groucho Marx
That may be true for him. But some of the best things in life are free (well, they don’t need money).
“Wealth consists not in having great possessions but in having few wants.” Epicetus
There is much more to being wealthy than just having money and possessions. We often focus on getting great possessions and hence the financial wealth to obtain them, but numerous studies show that beyond a certain level, more money won’t make you happier. And if we have fewer wants we are better able to focus on achieving those wants.
“Even right up to the end we found conflict with each other, which now means nothing. It just means nothing. If there is conflict in your lives – get rid of it.” Barry Gibb (speaking after the death of his brother, and fellow Bee Gees band member, Robin Gibb)
Money often drives conflict. Try to make sure it doesn’t.
