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During volatile markets like the one we have witnessed over the first half of 2010, we often go back to the basics, focusing on some of the tenets of legends in the investment business. Two individuals that come to mind are Warren Buffett, CEO of Berkshire Hathaway and the individual who wrote the book on value investing, Benjamin Graham. As you read through these quotes, try to determine of you are heeding their advice or are you like a rudderless boat being tossed about by the wind that is the day-to-day noise of the stock market.
“I don’t want to buy any stock where if they close the New York Stock Exchange tomorrow for five years I won’t be happy owning it. I buy a farm and I don’t get a quote on it for five years and I’m happy if the farm does ok. I buy an apartment house, don’t get a quote o it for five years – I’m happy if the apartment house produces the returns that I expect. But people buy a stock and they look at the price the next morning and they decide if they’re doing well or not doing well.” ~ Warren Buffett
“What you’re looking for is some way to get one good idea a year, and then ride it to its full potential. And that’s very hard to do in an environment where people are shouting prices back and forth every five minutes.” ~ Warren Buffett
“To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.” ~ Warren Buffett. We ask you, when you are investing, are you deciding to buy or sell with your heart or your head?
“Individuals who cannot master their emotions are ill-suited to profit from the investment process. The investor’s chief problem – and even his worst enemy – is likely to be himself.” ~ Benjamin Graham
“Most businesses change in character and quality over the years, sometimes for the better, perhaps more often for the worse. The investor need not watch his companies’ performance like a hawk; but he should give it a good, hard look from time to time.” ~ Benjamin Graham
“Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.” ~ Benjamin Graham
Finally, our favorite, “the market, like the Lord, helps those who help themselves. But unlike the Lord, the market does not forgive those who know not what they do.” ~ Warren Buffet
THE BOTTOM LINE – Be rational when investing. Keep emotions out of it. Spend some time learning how do invest and if you can’t or won’t spend the time or are ill-suited to invest by yourself, contact a professional. We’d like to apply for that job.