Quotes About Finance

If you decide to buy bonds or a bond fund, make sure the average maturity is less than the time horizon of the savings.

One hoary investment company story describes a young broker asking an old one about the secret to his success. The latter replies, "It's simple; over the years I've slowly transferred my client's assets to my own name.

Nowhere is historian George Santayana's famous dictum, "Those who cannot remember the past are condemned to repeat it," more applicable than in finance. Financial history provides us with invaluable wisdom about the nature of the capital markets and of returns on securities. Intelligent investors ignore this record at their peril. Risk

The point of this whole historical exercise is to establish the most important concept in finance, that risk and return are inextricably connected. If you desire the opportunity to achieve high returns, you have to shoulder high risks.

When, and only when, you've gotten rid of all your debt are you truly saving for retirement.

The Austrian economist Eugen von Böhm-Bawerk stated that the cultural and political level of a nation could be discerned by its interest rate: The more advanced the nation, the lower the loan rate.

At this point, it's important to clarify the difference between bonds and stocks. A bond is simply a loan. Most often, bonds have a sharply limited upside: the best that you can do is collect your interest payments and principal at maturity. A share of stock, on the other hand, represents a claim on all of the future earnings of the company. As such, its upside is potentially unlimited. It

Paradoxically, in the long run, bonds are at least as risky as stocks. This is because stock returns are "mean reverting." That is, a series of bad years is likely to be followed by a series of good ones, repairing some of the damage.

Investors cannot earn high returns without occasionally bearing great loss.

If you still crave financial thrills or feel compelled to have exciting investments to talk about with folk at parties, then designate a very small corner of your portfolio as mad money, to be deployed in 'exciting' investments. Just make sure to promise yourself that when it's gone, it's gone.

When all is said and done, there are only two kinds of investors: those who don't know where the market is headed, and those who don't know that they don't know. Then again, there is a third kind: those who know they don't know, but whose livelihoods depend on appearing to know.

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

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.

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.

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.

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.

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.

Always favor expected returns calculated from the Gordon Equation over past returns, no matter how long of a period they cover.

A good rule of thumb is to never, ever pay more than 15 years fair rental value for any residence.c This computes out to a 6.7 percent (1/15th) gross rental dividend, or 3.7 percent after taxes, insurance, and maintenance, which is about what you might expect from a mixed portfolio of stocks and bonds.

Investors tend to be touchingly naïve about stockbrokers and mutual fund companies: brokers are not your friends, and the interests of the fund companies are highly divergent from yours.

La rentabilidad elevada en la inversión no puede obtenerse sin asumir un riesgo sustancial. Las inversiones seguras producen escasos beneficios.