Understanding how investors think is essential whether you’re looking for funding for your own business or aiming to make wise investment choices. However, not all investors are willing to share their experiences for the benefit of others. Some may do so during interviews or podcasts, while others prefer sharing anecdotes at shareholder meetings or public forums. Then, others take time from their daily schedules to write books, offering their experiences to those interested in reading and learning from them.
Here is a list of some of the world’s top investors who challenged conventional norms in investing, transforming it into an admirable craft. These could be termed as investing principles —concise, insightful pieces of wisdom that encapsulate fundamental principles for successful investing.
Warren Buffett
Investing Mantra: “Be fearful when others are greedy and greedy when others are fearful.”
This renowned quote, often credited to legendary investor Warren Buffett, encapsulates his approach to investing, which eschews herd mentality and emphasizes contrarian thinking.
The first part of the quote translates to “Be cautious when others are exuberant”. This advice suggests refraining from participating in market euphoria and purchasing stocks at inflated prices. When optimism prevails and prices soar, it often indicates an overheated market that may soon correct itself.
The second part of the quote translates to “Be bold when others are scared”. When the market experiences downturns and widespread pessimism prevails, it can offer an opportunity to acquire quality stocks at discounted prices. These undervalued companies may subsequently rebound as market sentiment improves.
Buffett underscores the value of remaining composed and disciplined. When others panic and sell solid companies at reduced prices, it’s the opportune moment to act boldly and strategically enhance your portfolio.
Stanley Druckenmiller
Investing Mantra: “The best way to achieve long-term success is not in timing the markets, but in time in the markets.”
This principle that Druckenmiller firmly believes in suggests that “time in the market” is a fundamental aspect of achieving long-term investment success. Forecasting short-term market movements is exceedingly difficult, even among seasoned professionals. Fixating on market timing can result in missed chances and hasty choices.
Compounding represents the phenomenon of “interest on interest.” When you remain invested over the long term, your returns accumulate on top of each other, substantially increasing your total gains. Historically, the stock market has shown a positive trajectory over extended periods, notwithstanding occasional short-term declines. By maintaining your investments, you navigate through these fluctuations and capitalize on the overall upward trend.
Ray Dalio
Investing Mantra: “He who lives by the crystal ball will eat shattered glass.”
When Dalio mentions a “crystal ball,” he is talking about depending on forecasts for future market performance. Such predictions are frequently unreliable and can result in poor investment decisions. Dalio underscores the significance of adopting a long-term viewpoint by recognizing the futility of market timing. Rather than pursuing immediate profits, investors should prioritize remaining invested and capitalizing on the market’s overarching upward trajectory.
The metaphor of “shattered glass” underscores the risks of relying on predictions. Attempting to time the market can result in substantial losses when predictions prove incorrect.
Howard Marks
Investing Mantra: “You can’t predict. You can prepare.”
“You can’t predict” signifies that financial markets are intricate systems shaped by numerous factors, many of which defy prediction. Attempting to forecast precise market movements or pinpoint specific events is a futile endeavor.
“You can prepare” indicates that although predicting the future is not feasible, you can proactively take measures to anticipate various outcomes. This includes identifying and evaluating potential risks associated with your investments, as well as diversifying your investments across different asset classes and sectors to manage risk effectively.
By prioritizing preparation, investors can cultivate resilience and navigate through the inevitable fluctuations of the market. While this approach doesn’t ensure success, it enhances the likelihood of enduring challenges and reaching financial objectives.
Charlie Munger
Investing Mantra: “The big money is not in the buying and selling but in the waiting.”
This insightful quote from Charlie Munger, vice-chairman of Berkshire Hathaway and longtime partner of Warren Buffett, encapsulates a fundamental aspect of their value investing philosophy: Patience and a commitment to the long-term perspective.
Munger explains that while the market may exhibit short-term volatility, exceptional companies typically outperform over extended periods. By exercising patience and maintaining your investments, you provide them with the opportunity to grow and achieve their maximum potential.
3.6 Crore Indians visited in a single day choosing us as India’s undisputed platform for General Election Results. Explore the latest updates here!
Download The Mint News App to get Daily Market Updates.
Published: 27 Jun 2024, 11:15 AM IST