Trading truisms and time-tested investment adages
Many memorable one-liners have emerged from Wall Street, offering intriguing insights into the approaches of both long-term investors and short-term traders
John Templeton: “The four most dangerous words in investing are ‘This time it’s different’ ” Photograph: PA/Wire
Warren Buffett: “Be fearful when others are greedy. Be greedy when others are fearful.” Photograph: Kevin Lamagque/Reuters
George Soros: “I am cautious of going against the herd, I am liable to be trampled on.” Photograph: Kevin Lamarque/Reuters
Sometimes, you can find more wisdom in a single sentence than in an entire book, and that’s particularly true amongst the investment and trading fraternity, many of whom have a gift for producing pithy pearls of wisdom.
One can make – or lose – money in the markets by any number of different approaches, and the list below reflects this, with contrarian investors and trend traders asserting their own idiosyncratic take on matters.
“Be fearful when others are greedy. Be greedy when others are fearful” – Warren Buffett.
“I do the opposite to what I feel I should do. When I’m feeling sick in my stomach, it’s time to buy. When I feel great, it’s time to sell” – Elaine Gazarelli, Wall Street analyst.
No-one rings a bell when the market peaks – Wall St adage.
“Buy when there is blood in the streets” – Baron Rothschild.
“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime” – Jim Rogers.
“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February” – Mark Twain.
“The stock market is filled with individuals who know the price of everything, but the value of nothing” – author and investor Philip Fisher.
“Value investing is at its core the marriage of a contrarian streak and a calculator” – billionaire value investor Seth Klarman.
“Face up to two unpleasant facts: the future is never clear and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values” – Warren Buffett.
On the long term
“The single greatest edge an investor can have is a long-term orientation” – Seth Klarman.
“Almost never” – Philip Fisher’s advice on the best time to sell.
“Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497” – Warren Buffett, October 2008, in the aftermath of Lehman Brothers’ collapse. The S&P 500 has since almost doubled.
On bull and bear markets
“At the start of a bear market, nobody knows it is a bear market – they just think it is a correction” – Marc Faber.
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets” – former Fidelity manager Peter Lynch.
Bull markets climb a wall of worry – Wall Street adage.
“Bull markets are born on pessimism, grown on scepticism, mature on optimism and die on euphoria” – John Templeton.
“There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know” – investment author William Bernstein.
“The idea that you can actually predict what’s going to happen contradicts my way of looking at the market” – GeorgeSoros.
“Have an opinion on what the market should do but don’t decide what the market will do” – former financier and investor Bernard Baruch.
“Probably my best technique is not picking up the phone to close out a winning trade” – trend trader Jerry Parker.
“Letting winners ride is every bit as important as cutting losses short. If you don’t stay with your winners, you are not going to be able to pay for the losers” – commodities trader Michael Marcus.
“The successful trader has to reverse his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit” – Jesse Livermore.
“I got rich by selling too soon” – Bernard Baruch.
“Just because you buy a stock and it goes up does not mean you are right. Just because you buy a stock and it goes down does not mean you are wrong” – Peter Lynch.
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong” – George Soros.
“The game taught me the game. And it didn’t spare me the rod while teaching” – legendary 1920s trader Jesse Livermore.
“Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocket book and to the soul” – Jesse Livermore.
“There is no such thing as a paper loss. A paper loss is a very real loss” – Jim Rogers.
“Like an oversexed guy in a harem” – Warren Buffett in 1974, describing his appetite for the many cheap stocks on offer at the time.
“According the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one–night stands a romantic” – Warren Buffett.
“A bull market is like sex. It feels best just before it ends” – Barton Biggs.
“People who look for easy money invariable pay for the privilege of proving conclusively that it cannot be found on this earth” – Jesse Livermore.
“Bulls and bears make money but pigs get slaughtered” – Wall Street saying.
“I’ve made phenomenal amounts of money for very simple decisions but I was willing to make them. Somebody had to” – trend trader Ed Seykota.
“You learn in this business: If you want a friend, get a dog” – Carl Icahn.
“Wall Street professionals know that acting on ‘inside’ tips will break a man more quickly than famine, pestilence, crop failures, political readjustments or what might be called normal accidents” – Jesse Livermore.
“With enough inside information and a million dollars, you can go broke in a year” – Warren Buffett.
“I am cautious about going against the herd; I am liable to be trampled on” – George Soros.
Never catch a falling knife – Wall Street adage.
“If you stick around when the market is severely against you, sooner or later they are going to carry you out” – Randy McKay, trader.
“You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
Know when to run” – Kenny Rogers.
On price and speculation
“If it’s in the newspapers, it’s in the price” – contrarian investor Bill Miller.
“The four most dangerous words in investing are ‘This time it’s different’ ” – John Templeton.
“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich–quick adventurer. They will die poor” – Jesse Livermore.