Behavioral Wisdom from the Most Successful Investors


Jeffrey van Fossen, CFA, Managing Director, Portfolio Manager

After 35 years working in finance, I have seen a lot. Not everything, but almost! Managing money for clients through different market environments has not only taught me what does and does not work in investing, but also how human behavior can interfere with successful investment outcomes.

Successful investing requires patience, discipline and the ability to control one’s emotions in both bull and bear markets. Believe it or not, there is little disagreement among the most well-known successful investors about what works in investing. Yet human nature, society, culture and even our subconscious have a harmful tendency to distract us. So, here are some insightful quotes about investor behavior that we hope you’ll find both entertaining and instructive, especially in this a time of heightened uncertainty.

On Practicing Patience

Being patient with your investments means that, once you have selected an asset to invest in, you should ignore short-term price volatility in the value of the investment and remain invested for the long-term.

“The stock market is a device to transfer money from the ‘impatient’ to the ‘patient’.” – Warren Buffett

“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” – Charlie Munger

On Maintaining Discipline

Smart, successful investors know that the price you pay impacts returns when it comes to making money in stocks, real estate or a private business. You can erode future returns and potentially lose money, even in the world’s greatest businesses, if you pay too much at purchase.

“Most people get interested in a stock when everyone else is. The time to get interested is when no one else is. You cannot buy what is popular and do well.” – Warren Buffett

“People start being interested in something because it’s going up, not because they understand it or anything else. But the guy next door, who they know is dumber than they are, is getting rich and they aren’t.” – Warren Buffett

“In the short run, the market is a voting machine. In the long run, it is a weighing machine.” – Benjamin Graham

On Controlling One’s Emotions

Investing based on emotion (particularly greed and fear) is the main reason unsuccessful investors move with the herd, buying at market tops and selling at market bottoms.

“Everything about our human makeup conspires to make us do the wrong thing. Most people get excited at the highs and depressed at the lows instead of being able to buy low and sell high. That’s the human failing.” – Howard Marks

“If you are emotional about investing, you’re not going to do well.” – Warren Buffett

“Winning at money is 80 percent behavior and 20 percent head knowledge.” – Dave Ramsey

On Market Timing

A major investor pitfall is trying to time markets. Even though we all know that the stock market is always vulnerable to occasional 10%, 20% or even larger drawdowns, historical data clearly shows that there is no evidence that you’ll benefit by trying to time a market bottom or top.

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch

“It must be apparent to intelligent investors that if anyone possessed the ability to do so [forecast the immediate trend of stock prices] consistently and accurately he/she would become a billionaire so quickly they would not find it necessary to sell their stock market guesses to the general public.” – David L. Babson

“I don’t know when to buy stocks, but I know whether to buy stocks.” – Warren Buffett

Times of heightened uncertainty can lead to reactionary decisions that may harm, or at the very least decrease the odds of achieving your long-term goals. Revisiting time-tested behavioral principals referenced in the above quotations, combined with communication around any changes in your personal circumstances and liquidity needs, can ensure proactive steps in managing your portfolio through volatility.

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