Quotes from William J. Bernstein

It costs more to transact abroad, and many foreign governments tax stock dividends; although you can recover this cost in a taxable account through the foreign tax credit on your U.S. tax return, you cannot do so in a retirement account.

Those who ignore financial history are condemned to repeat it.

Looked at from another perspective, in the 30 years from 1952 to 1981, stocks returned 9.9% and bonds returned only 2.3%, while inflation annualized out at 4.3%. Thus, during this period, the bond investor lost 2% of real value on an annualized basis, while the stock investor made a 5.6% real annualized return. The last fifteen years of that period were years of high inflation, so this is just another way of saying that stocks withstand inflation better than bonds. Short-term

What investment banking is to the ambitious and acquisitive today, the pepper trade was to the Romans—the most direct route to great riches.

Tasa de descuento alta = riesgo percibido elevado, alta rentabilidad, cotización de acciones depreciada. Tasa de descuento baja = riesgo percibido bajo, baja rentabilidad, cotización de acciones elevada.

The Story of the Telegraph and a History of the Great Atlantic Cable, in which they breathlessly proclaimed, How potent a power, then, is the telegraphic destined to become in the civilization of the world! This binds together by a vital cord all the nations of the earth. It is impossible that old prejudices and hostilities should longer exist, while such an instrument has been created for an exchange of thought between all the nations of the earth.46

Why the correlation between popular interest and subsequent low returns? Simple: Driving the price of any asset higher requires the entry of new buyers, and when everyone is invested in stocks, real estate, or gold, there's no one left to join the party; the entry of naïve, inexperienced investors usually signals the end.

We tend to extrapolate the recent past indefinitely into the future; in the 1970s, investors thought that inflation would never end, whereas now most people think it will never occur again. The first viewpoint was proven wrong within a few years, and the latter viewpoint most likely will be soon.

During bull markets, everyone believes that he is committed to stocks for the long term. Unfortunately, history also tells us that during bear markets, you can hardly give stocks away. Most investors are simply not capable of withstanding the vicissitudes of an all-stock investment strategy. The

Von Kerssenbrock, a loyal Catholic, sniffed that Rothmann preached "not so much with solid arguments as with clumsy aspersions. The ignorant commoners, however, who cannot distinguish eloquence from bombast, thought that he had spoken excellently."107

It's pretty clear that there's a relationship between return and risk—you enjoy high returns only by taking substantial risk. If you want to earn high returns, be prepared to suffer grievous losses from time to time. And if you want perfect safety, resign yourself to low returns.

Albert Einstein has it that "Compound interest is the eighth wonder of the world. He who understands it, earns it.

most paleographers now believe that the "idea of writing" must have spread along with commerce, most likely from Sumer to Egypt.33

Great intelligence and good luck are not required. The essential characteristics of the successful investor are the discipline and stamina to, in the words of John Bogle, "stay the course." Investing is not a destination. It is an ongoing journey through its four continents—theory, history, psychology, and business.

The point here is that runs of 4 or more heads or tails are perceived as a nonrandom pattern, when in fact they are in fact the rule in random sequences, not the exception. Stock market participants frequently make this mistake, and an entirely bogus field of finance known as "technical analysis" is devoted to finding patterns in random financial data.

Note how small stocks have had higher returns than larger stocks, but that they also have higher risks. In both the Great Depression and the 1970s bear market, small-stocks sustained higher losses than large stocks. In addition, the small stock advantage is extremely tenuous—it's less than a percent-and-a-half per year, and there have been periods of more than 30 years when large stocks have bested small stocks. For these reasons, the small-stock advantage is controversial.

There is, in fact, a rich and informative scientific literature about what works and what doesn't in finance; it is routinely ignored. Instead of depending on the Journal of Finance (the investing equivalent of The New England Journal of Medicine), they get their advice from USA Today or worse, from their stockbroker. Of

In common parlance, the shares of good companies are called "growth stocks," and those of bad companies are called "value stocks.

The most fundamental characteristic of any investment is that its return and risk go hand in hand. As all too many have learned in the past few years, a market that doubles rapidly is just as likely to halve rapidly, and a stock that appreciates 900% is just as likely to fall 90%.

The risk of owning stock in a single shaky company is very high. But in a portfolio of many such losers, a few might reasonably be expected to pull through, providing the investor with a reasonable return. Thus

Whether you invest in stocks, bonds, or for that matter real estate or any other kind of capital asset, you are rewarded mainly for your exposure to one thing—its risk. We'll learn just how to measure that risk and explore the interplay of risk and investment return. Over

Act as if every broker, insurance salesman, mutual fund salesperson, and financial advisor you encounter is a hardened criminal, and stick to low-cost index funds, and you'll do just fine.

Thus, the logic of the market suggests that: Good companies are generally bad stocks, and bad companies are generally good stocks. Is this actually true? Resoundingly, yes. There have been a large number of studies of the growth-versus-value question in many nations over long periods of time. They all show the same thing: unglamorous, unsafe value stocks with poor earnings have higher returns than glamorous growth stocks with good earnings. Probably

the reason why Gilgamesh needed the assent of his elders to defend his city was probably that he did not have at his disposal the writing tools necessary to command absolute political control over large numbers of citizens. By the same token, Uruk's literate, scribal elite was not yet able to disempower its illiterate masses.