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Five Great Investment Quotes
« on: May 27, 2012, 01:05:27 AM »
Five Great Investment Quotes

By Alan Oscroft

There are thousands of quotes out there on all manner of investing topics, and many of them make for great sound bites. But some of them often fail to hit home and we really would benefit by thinking about them a bit more.

So here are five that

I think are amongst the most useful, and which everyone who invests in the stock market (especially for the long term) should always keep in the back of their minds. In reverse order:

#5: "There's A Sucker Born Every Minute"

Famously not said by P T Barnum, everyone has heard this one, so why should we give it special attention?

Well, that 'everyone' includes all of those taken in by 419 scams, investors who have been had by boiler rooms, and everyone who has piled into an investment on someone else's say so without exercising appropriate vigilance first -- I'd wager almost every one of those had heard the "sucker" quote, but didn't think it applied to them.

Whenever you suspect something is too good to be true, stop and ask, "Am I the sucker here?"

#4: "In this business if you're good, you're right six times out of ten. You're never going to be right nine times out of ten."

Peter Lynch, author of the famous "One Up On Wall Street", this time. What's he's saying is that great investors, over the long term, are those who manage to do just a bit better than average, but keep on doing it over and over again -- they are not the people who get it right every time, because such people don't exist.

We're not going to win every time, and we are going to get some choices wrong (sometimes very badly wrong), but we need to expect that and not think we're failed investors when it happens. Sometimes it can be really tough when you get things wrong and lose money, and I've seen early failures put some newcomers off for life, which is a real shame.

#3: "The stock market is filled with individuals who know the price of everything, but the value of nothing."

From Philip Fisher, author of "Common Stocks and Uncommon Profits", this hits at the focus of the great majority of people who ever think about the stock market -- the share price.

Listen to any group of people discussing an investment, and you're far more likely to hear talk of the share price going up, down, or whatever, than about the company's cash flow or the direction its operating costs are going. But actual business performance is what counts to a long-term investor -- the share price is only important twice; once when we buy and once when we sell.

#2: "You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right."

From the pen of Benjamin Graham, this helps sum up the psychology of crowds.

If people didn't follow the crowds, we'd have had no tech stock boom and bust, no housing price boom and bust, and the long-term chart of the FTSE would be a lot smoother than it is. But by the same token, how often to we hear people saying, "I always go against the crowds"? That's just as wrong as always following them, because the crowds are actually often right.

What matters is your analysis and reasoning, and if you get those right, it doesn't matter whether one person or a million people agree or disagree with you.

#1: "In the short run, the market's a voting machine. In the long run, it's a weighing machine."

I know everyone and their dog lists this one, from Warren Buffett, as a favourite, but it's even better in its full form:

"In the short run, the market's a voting machine and sometimes people vote very unintelligently. In the long run, it's a weighing machine and the weight of business and how it does is what affects values over time."

In the short term share prices reflect all sorts of sentiments, often irrational, but in the long term they reflect the true worth of a company's actual business performance. It can be hard to ignore short-term scares, fads and fashions, but t

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Five Great Investment Quotes
« on: May 27, 2012, 01:05:27 AM »

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