The Wisdom of Great Investors

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Periods of extreme volatility and uncertainty in the financial markets often result in investors making decisions detrimental to building long-term wealth. It is at times like these that it makes sense to reflect on the principles that have stood some of the world’s greatest investors in good stead over the decades. The quotes and charts below have been compiled from a report by Davis Advisors.

Avoid self-destructive investor behavior





Understand that crises are inevitable





Don’t attempt to time the market





Be patient





Don’t let emotions guide your investment decisions





Recognize that short-term underperformance is inevitable





Disregard short-term forecasts and predictions







It is important to understand that periods of market uncertainty can create wealth-building opportunities for the patient, diligent, unemotional and long-term investor.

Source: Davis Advisors


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12 comments to The Wisdom of Great Investors

  • Kevin

    This fails to show the importance of entry and exit dates. Also it only has half the case when showing missing the best days – to be fair the table should be repeated for missing the bad days.

    If you didn’t try to establish whether the market was overvalued in 1999 and blindly invested a lump sum then then you would have lost half your inflation-adjusted capital over the 10 years to date.

  • Of prime importance to long term investor returns is the point of entry into the market*. There is always less stress/emotion on declines if you purchased at a fairly low point to begin with**.
    To enter the market today is almost a guarantee of fair real returns – providing history repeats itself – and if one looks at how we got into this mess in the first place there is every indication that it does.
    * Warren Buffet.
    ** Shelby Davis.

  • marilyn

    Wisdom indeed… thank you.

  • Gordon

    All of the foregoing are a PERFECT recipe for financial suicide in a secular bear market lasting years, such as that just now commencing.
    Further, equities have gone NOWHERE since the late 1990’s. On an INFLATION ADJUSTED basis their returns have been dismal, if not negative. Numerous sources have said that since that time T-bills have had the best risk adjusted return.
    Still further, most ‘pro’s’ managing portfolios routinely fail to meet the benchmark S&P 500 average in staggeringly high percentages – see the work of John Bogle re same.
    These quotes are a rational edifice to persuade people not to sell more heavily than they already are! Their precepts were applicable until 1998. They are, now, fraught with danger.

  • The quotes are certainly time tested, and true. So also is human behavior. It is never easy to follow your “gut” against overwhelming opposite opinion.

  • Harold Katt

    Buy and hold can be a big loser.

    What if you bought Japanese stocks in 1988, 20 years later the market is still at the lows. I would hate to be entering retirement will a portfolio of Japanese Stocks.

    Demographics, Personal Debt, Pension Plan Underfunding, All point to “Japan Experience” world-wide.

    The mantra of Buy & Hold, And no market timing, asset allocation, and dollar-cost averaging, are good for the financial planners wealth..but not for the investor

  • Frank Wordick

    Here are a bunch of losers, who are scared silly that their clients are going to migrate their money to a Social Security GRA in order to recoup most of the big losses which they incured since August. None of this lot did anything to protect their clients wealth, which has been largely destroyed. Now where will their fat fees come from? They publish rationalizations to try to cover their nether quarters. We hear all this drivel about the average investor doing this or that to ruin his investments. Have a look at what these gurus and experts have done with their clients investments. Are the readers of this blog mostly average investors or are they in possession of a significant amount of financial information? I suggest to you that, if anyone is going to have the privilege of losing your money, it should be you. Why pay one of these incompetent floating heads to do the job? What they are are simple administrators. Pay them to administer your account! Forget about the rest! As for Buffet, he is over the peak. It’s all downhill for him from now on. He got in way way too early with really really big bucks. He would feel a lot better, if he had some company on the way down to financial oblivion. Interested in joining him? None of this lot of financial mediocrity has any ability to figure out whether the market is going up, down or sideways. Since they all consider themselves to be financial geniuses, they are absolutely certain no one else can either. I suggest to you that you would be a lot better off to read the work of people like Albert Edwards and James Montier, and Bennet Sedacca, analysts who have more than half a brain and consequently something useful to say, and also read the comments by Kevin, Gordon and Harold, especially the latter two, posted in this blog. Then make your own decisions in respect of the current asset allocations in your portfolio of investments. Do you really think that you would do worse than this bunch of incompetent boobs, who cling to orthodox investment theory which has been proven to be bulldust by the market which it is supposed to explain?

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  • Frank Wordick

    I have just got the results on Berkshire Hathaway. Third quarter performance showed a 77% drop in profit. This quarterly fall in profit is the fourth in a row. Do you remember what Buffet’s first rule of investment is? It is “Don’t lose any money!” And do you remember his second rule of investment? Hint: It’s the same as the first rule. You may recall that Buffey bought big into Goldman Sachs recently. Goldman’s credit default swaps are tied for most expensive in the industry. Why would anyone want to take advice from Buffey about when to get into the stock market???

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