Investing can be tricky, and those who are new to investing can quickly start to feel overwhelmed. At CORDA Investment Management, LLC, we follow the contrarian approach pioneered by Warren Buffett and Benjamin Graham. This approach allows us to find solid companies with strong long-term potential that are temporarily trading at a discount. In addition, here are 10 wealth management quotes that can help guide your investing strategy.
1. “In the short term, the market is a popularity contest. In the long term, the market is a weighing machine.” – Warren Buffett
This quote reminds us that the stock market is subject to short-term forces that don’t accurately reflect a particular stock’s long-run forecast. If you have ever tried to buy a must-have Christmas toy, only to have your child rapidly grow tired of it, you are familiar with this phenomenon. A stock can soar or plummet in the short term for no reason other than simple popularity, but a long-range view of the market is far more important when deciding where to invest.
2. “Invest in a business any fool can run, because someday a fool will.” – Charlie Munger
This quote points out the reality that some companies truly live or die by the person who runs them. Corporate management turnover is inevitable, and not all managers are equally capable. It is crucial to choose investments in companies that are strong enough to withstand corporate shakeups and poor management choices.
3. “If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.” – Benjamin Graham
It is human nature to seek out both novelty and status symbols. But buying common stocks this way is a recipe for disaster. Preferred stockholders are paid a set dividend, while common stock dividends are subject to market forces. Even more importantly, if a company goes under, preferred stockholders are paid before common stockholders, who typically receive nothing. Therefore, think of common stocks as a sort of household necessity, and select them accordingly. Don’t take a chance on a common stock solely for novelty or status.
4. “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.” – Warren Buffett
This quote reminds us again of the vagaries of the short-term market. Market speculation and quick buying and selling is a dangerous financial game. In most cases, it is far better to choose stocks that have consistently gone up over time, even at a more moderate rate, than to gamble on a short-term price spike.
5. “If you’ve got two suitors who are eager to have you, but one is way better than the other, you’re going to choose that one rather than the other. That’s the way we filter stock buying opportunities.” – Charlie Munger
Opportunity cost is a fact of life. Choosing which stock to buy is fundamentally no different than choosing between any other set of options. Look at the costs and benefits of each, and decide which makes better sense according to your personal investment philosophy.
6. “A great company is not a great investment if you pay too much for the stock.” – Benjamin Graham
This one quote could save you significant amounts of money. No matter how much you personally like and support a company, overpaying for stock is always a losing proposition. Make rational decisions based on past data and future projections rather than jumping on board with the latest trend or investing blindly in companies you like.
7. “The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.” – Warren Buffett
Investors choose their investments for many different reasons. One of the most dangerous is the tendency to either follow the crowd or to take pride in going against the grain. To be a successful investor, you need to focus on your own independent analysis rather than worrying about what everyone else is doing.
8. “The ‘know-nothing’ investor should practice diversification, but it is crazy if you are an expert.” – Charlie Munger
Diversification is widely preached as the best strategy for investors, but in reality, it is a way to manage the risk of not knowing exactly what you are doing. In the beginning, diversifying can help you avoid major losses from poor investments. As you grow in knowledge and understanding, though, it only makes sense to go “all in” on the opportunity of a lifetime. The key is being able to recognize that opportunity when it arises.
9. “The individual investor should act consistently as an investor and not as a speculator.” – Benjamin Graham
This means simply that every investment you make should be based on logical reasoning. If you can justify both the specific investment and its cost according to your investment principles, it is likely a worthwhile investment for you. Speculating, or playing the odds according to your gut, is a far riskier strategy.
10. “The difference between successful people and really successful people is that really successful people say no to almost everything.” – Warren Buffett
This quote could be considered a guide to life, not just investment. There is always going to be another opportunity, another chance to diversify, another risk with potentially high gains. Those who try to chase every opportunity often find reasonable success. But those who become extremely successful are masters at clearing out the clutter. Saying no to almost everything lets you throw all your focus onto the handful of things that best help you meet your goals.
CORDA Investment Management, LLC, is an investment advisory firm that provides wealth management services for clients nationwide. CORDA’s headquarters is in Houston, and the firm also has offices in Austin and Dallas. If you are ready to begin a long-term professional relationship with a proven investment firm, please contact CORDA today at https://cordamanagement.com or by phone at (855) 439-0665.