Quotes About Investing

1. Divide capital into 10 equal parts and never risk more than a tenth of it on any one trade. 2. Never overtrade. 3. Never let a profit run into a loss. 4. Do not buck the trend. 5. Trade only in active stocks. 6. When in doubt, get out, and don't get in when in doubt. 7. Never buy just to get a dividend. 8. Never average a loss.

They bought blocks of bonds priced from 80 to 82 cents on the dollar, paying for them in bank notes worth half their face value!

It is not hard to make money in the market. What is hard to avoid is the alluring temptation to throw your money away on short, get-rich-quick speculative binges. It is an obvious lesson, but one frequently ignored.

I view investing as a method of purchasing assets to gain profit in the form of reasonably predictable income (dividends, interest, or rentals) and /or appreciation over the long term.

Two-thirds of professionally managed funds are regularly outperformed by a broad capitalization-weighted index fund with equivalent risk, and those that do appear to produce excess returns in one period are not likely to do so in the next. The record of professionals does not suggest that sufficient predictability exists in the stock market to produce exploitable arbitrage opportunities.

Look for growth situations with low price-earnings multiples. If the growth takes place, there's often a double bonus—both the earnings and the multiple rise, producing large gains. Beware of very high multiple stocks in which future growth is already discounted. If growth doesn't materialize, losses are doubly heavy—both the earnings and the multiples drop.

You will never be allowed to buy the really good IPOs at the initial offering price. The hot IPOs are snapped up by the big institutional investors or the very best wealthy clients of the underwriting firm.

For many of us, trying to outguess the market is a game that is much too much fun to give up. Even if you were convinced you would not do any better than average, I'm sure that most of you with speculative temperaments would still want to keep on playing the game of selecting individual stocks with at least some portion of the money you invest.

Finding the next Warren Buffett is like looking for a needle in a haystack. We recommend that you buy the haystack instead, in the form of a low-cost index fund.

And if you buy the new issue after it begins trading, usually at a higher price, you are even more certain to lose.

A stock selling at $100 per share with earnings of $10 per share would have the same P/E multiple (10) as a stock selling at $40 with earnings of $4 per share. It is the P/E multiple, not the price, that really tells you how a stock is valued in the market.

Kahneman and Tversky concluded that losses were 2½ times as undesirable as equivalent gains were desirable. In other words, a dollar loss is 2½ times as painful as a dollar gain is pleasurable. People exhibit extreme loss aversion, even though a change of $100 of wealth would hardly be noticed for most people with substantial assets. We'll see later how loss aversion leads many investors to make costly mistakes.

An even earlier example was the rise of dark pool stock trading. In 1979, the U.S. Securities and Exchange Commission (SEC) instituted Rule 19c3, which allowed stocks listed on one exchange, such as the New York Stock Exchange (NYSE), to be traded off-exchange. Many large institutions moved their trading large blocks to these dark pools, where they traded peer to peer with far lower costs than traditional exchange-based trading.

It's hard to make money working; and the harder the work, the worse the pay. It takes effort not to lose everything and end up on the street. It's easy, on the other hand, to get rich without producing anything, moving money from one place to another, speculating, taking advantage of stock opportunities, investing in the hard work of others.

We must recognize our own behavioral errors. To be blunt, you are not likely to become a cognitive Zen master anytime soon. But a little enlightenment could keep you from making some common investing errors.

Part of the game of investing is to come into your own. You must find some way that perfectly fits your personality because there is some element of a zero sum game in investing. If you buy, somebody else has to sell. And when you sell, somebody has to buy. You can't both be right.

The price of a commodity will never go to zero. When you invest in commodities futures, you're not buying a piece of paper that says you own an intangible piece of company that can go bankrupt.

It doesn't help to follow every rise and fall of your portfolio. It's better to tune out the day-to-day shifts, in fact. But getting a handle on the larger picture will make you feel more secure, and that goes a long way in calming your fear.

Democrats are going to proudly run on the fact that we turned the economy around. It was our policies under President Obama's leadership through the Recovery Act, through investing in the automobile industry.

Commissions add up, taxes are a big drag, margin ain't cheap. A good accountant costs money as well. The math on this one is obvious, yet investors often fail to recognize it: Keep your costs low and your turnover lower, and you will win in the end.

Market timing doesn't work. If all the bubbles and all this mispricing really exist, how come so few people see it before it turns out that way?

I think we're in the beginning of a bull market. When a bull market begins, nine months later the economy turns around.

In investing, we intuitively think we should make a number of small bets. A blockbuster strategy is the opposite. It means making fewer huge investments. But it turns out to be safer.

We talk about long-term patient investing, and that idea that slow and steady does win the race, that time can be your best friend when it comes to investing. That's why we have a turtle as a logo at Ariel.