Your coffee break investment plan - Day 10: Tips from the world's best investors
Woody Allen once quipped: “Money is better than poverty, if only for financial reasons”. The New Yorker is of course renowned for his pithy remarks.
But some of the world’s best investors have put forward their own nuggets of wisdom to help others understand their successful investing philosophies. We highlight some of the most pertinent, which if you take on board should stand you in good stead throughout your investment journey.
“Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffett
The world’s most successful investor and billionaire many times over has never been one for following the herd. As such do not be shy of investing when markets go down, you will ultimately be getting more bang for your buck.
If you had been brave enough to invest in the UK market in March 2009, at the worst point in the financial crisis, you would now be sitting on a 100%-plus return. But equally do not be over-indulgent during the good times; be happy to bank your profits.
"Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas." - Paul Samuelson
The late US economist and Nobel Prize winner was a big advocate of patience. To be successful, you need to invest regularly for a long period - certainly for a minimum of five years. Long-term gains are made by spending time in the market as opposed to attempting to time it.
If you adopt the latter strategy, you risk not only capturing the worst days but also losing out on the best. The more time you can give your money to enjoy the benefits of compounding, where your gains help boost future growth, the greater the difference it should make.
The stock market is filled with individuals who know the price of everything, but the value of nothing." - Philip Fisher
The US stockbroker was known for investing in well-managed, high-quality companies, which he held for the long run. His point here is just because something looks good value does not mean it is a good investment. Share prices can inexplicably fall but there can also be good reasons why a particular investment is languishing in the bargain bin.
At the turn of the century, the market was euphoric about technology stocks, and millions piled in, only to be left nursing severe losses when it transpired just how overpriced they were and values collapsed.
“The four most dangerous words in investing are: 'this time it's different’.” - Sir John Templeton
The US born investor famous for more than quadrupling his money during his first four years operated with his head, not his heart. As such always look at market trends over the long term - never assume that what happened before, cannot occur again.
The 1929 Wall Street crash was not the first great upheaval investors endured, and it certainly was not the last. Investors have suffered numerous crashes over time, such as the mid-1970s recession in the UK, ‘Black Monday’ in 1987, the Asian crisis hit in the late 1990s and of course the financial crisis of 2007-2008.
Always be committed to investing for the long-term because despite the ups and downs, over the past two decades, the UK market has soared by some 233%.
If you missed them, make sure you read the first nine articles in this series.
Also watch Moneywise editor Moira O’Neill interview Andy Parsons from The Share Centre about why you should start investing.
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).