In March 2020, when the Sensex cracked to below 28,000 level caused by the onset of the Covid-19 crisis, I wrote a post about how I was investing my money through the crisis.
Today, just 18 months later, the Sensex has touched the 60,000 mark, or almost 120% up from its March 2020 lows, and I got down to writing another post on how I am investing my money through this euphoria.
But then I stopped, for except my stocks doing well like everyone else’s, nothing has changed as far as “how I invest” is concerned.
I quickly changed my idea for today’s post, and thought why not share with you some of the most important “sanity-check” lessons that I have learned from some of the wisest investors around.
So, here are a few relatively unknown but timeless quotes from some of the investing greats that have served me well and stay grounded over the years, and may also serve you good lessons on how you should view stock investing from the current perch, and not give in to the mindlessness that such times foster.
Don’t just read these quotes. Pause and think about them. Maybe, write them down by hand in your notebook so you remember them for long. As you will realize while you are reading them, they contain the essence of many investment books.
Are You Rising, Or Is It the Pond?
Bull markets go to people’s heads. If you’re a duck on a pond, and it’s rising due to a downpour, you start going up in the world. But you think it’s you, not the pond.
~ Charlie Munger
No God Wants You to Get Rich
Once a bull market gets under way, and once you reach the point where everybody has made money no matter what system he or she followed, a crowd is attracted into the game that is responding not to interest rates and profits but simply to the fact that it seems a mistake to be out of stocks. In effect, these people superimpose an I-can’t-miss-the-party factor on top of the fundamental factors that drive the market. Like Pavlov’s dog, these ‘investors’ learn that when the bell rings – in this case, the one that opens the New York Stock Exchange at 9:30 a.m. – they get fed. Through this daily reinforcement, they become convinced that there is a God and that he wants them to get rich.
~ Warren Buffett
Things Don’t Get Better (or Worse) Forever
Very early in my career, a veteran investor told me about the three stages of a bull market. Now I’ll share them with you. The first, when a few forward-looking people begin to believe things will get better. The second, when most investors realize improvement is actually taking place. The third, when everyone concludes things will get better forever. Why would anyone waste time trying for a better description? This one says it all. It’s essential that we grasp its significance.
~ Howard Marks
Know What ‘You’ Believe In
When prices go up enough, everybody believes something, even if it is only that everybody else is just about to believe.
~ Adam Smith, The Money Game
Survival is the Only Road to Riches
Survival is the only road to riches. You should try to maximize return only if losses would not threaten your survival and if you have a compelling future need for the extra gains you might earn.
~ Peter Bernstein
There’s Only One Side of the Stock Market
There is only one side to the stock market; and it is not the bull side or the bear side, but the right side.
~ Jesse Livermore
Buy Cheap, Never Bad
My experience teaches me that by far the largest losses have been sustained by investors through buying securities of inferior quality under favorable general conditions.
~ Benjamin Graham
Don’t Just Get Sucked In
As a runaway bull market persists, its relentless vacuum cleaner eventually sucks everyone in. Investors who are skeptical about the perceived overvaluation are forced to watch as their career prospects melt down and security prices melt up. New rationalizations, disguised as rationales, enter the higher levels of discourse to justify jumping, or creeping, onto the asset-price train despite disdaining it when it was dozens of percentage points lower. A feeling of fear and acrophobia then becomes replaced by the giddy and disorienting feeling of finally being on track to make money along with the crowd and not feeling isolated in Cranky Valueland.
~ Paul Singer
Think About Your Wealth Like Your Children
Your wealth is like your children — the primary link between your present and the future. You should try to think about it in the same way. You want your children to have freedom but you also want them to be good people who can take care of themselves. You don’t want to blow it, because you don’t get a second chance. When you invest, it’s not your wealth today, but it’s your future that you’re really managing.
~ Peter Bernstein
* * *
“If we are facing in the right direction, all we have to do is keep on walking,” goes a Buddhist proverb.
It captures the essence of how we can train ourselves to be calm and patient, in life and while investing our hard-earned money, whatever be the situation.
When euphoria or fear runs high, don’t run with it. Instead, keep a calm mind, think well through things, and be patient. Avoid hasty decisions and keep playing according to your plan.
Things go bad after good times, like they go good after bad. But if you maintain your sanity before they go good or bad, you won’t be excessively elated or disturbed when they actually do.
That’s what intelligent investing should be all about.
Arvind Padmanabhan says
Very prudent and required post for everyone who are too elated or very fearful so that they don’t loose their minds and sleep later.