There's a tremendous amount of insight from wise men and women from many eras and professions, even if they couldn't distinguish an income statement from a dirty napkin.
"Not everything that can be counted counts, and not everything that counts can be counted."
-- Albert Einstein
When Warren Buffett scooped up gobs of Coca-Cola (NYSE: KO ) stock in the late 1980s, much of his analysis was likely from something you wouldn't find in any financial statement: the effect Coke had on consumers' minds. On the flip side, if you took the run-up in homebuilders' earnings over the past few years as a normal state of affairs without considering how irrational buyers had become, you'd be eating crow today.
"If you hold a cat by the tail, you learn things you cannot learn any other way."
-- Mark Twain
And if you own a stock that tanks beyond recovery, you'll learn something that no collection of financial horror stories will teach you. Rather than kicking yourself when you make an occasional blunder, take it as an opportunity to learn an important lesson. Years of classroom study or outside reading can't teach you what the experience of actual investing will.
"It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."
-- Mark Twain
Those who convinced themselves home prices were guaranteed to march higher for eternity played a painful joke on themselves. It wasn't a lack of information about an impending pullback, it was that they had convinced themselves a pullback would never happen. If you ever find yourself holding a stock that's "certain" to do well, it's time for a reality check. As Ben Franklin said, "Certainty? In this world nothing is certain but death and taxes."
"All men's miseries derive from not being able to sit in a quiet room alone."
-- Blaise Pascal
With so much information pumped throughout the Internet, you could find a dozen investment ideas promising triumph before daybreak. Odds are, many of them will turn out to be rubbish. Investing success comes to those patient enough to wait for the fat pitch, not those who anxiously jump willy-nilly into anything and everything thrown their way.
"Those that fail to learn from history are doomed to repeat it."
-- Winston Churchill
Surprise, surprise, real estate isn't the first absurd bubble we've seen. Just eight years ago dot-com darlings like Yahoo! (Nasdaq: YHOO ) and Amazon (Nasdaq: AMZN ) taught us an important lesson in bubble mania. As if investors forgot everything that happened, real estate was pushed into uncharted territory, slaughtering stocks like Beazer Homes (NYSE: BZH ) once the tide went out.
"I've made up my mind ... don't confuse me with the facts!"
-- Chris Axon
This one ties in perfectly with Churchill's quote above. Last year, few cared that stocks like Crocs (Nasdaq: CROX ) and Chipotle (NYSE: CMG-B ) traded at insane valuations. As long as shares kept soaring, nothing would change their minds. Until the stocks tanked ... then they learned quickly. It's essential to be open-minded about your investments -- even if you love 'em to death -- when the facts change.
"A jug fills drop by drop."
While many chase runaway investments that will make them spectacularly rich in short order, it's telling that one of the best companies to own over the last several decades -- Berkshire Hathaway (NYSE: BRK-B ) -- has compounded its book value per-share at 21.1% per year since 1965. That's an astonishing performance, of course, but it happened slowly enough to cause those looking for instant success to dig elsewhere. While quick multibaggers can be appealing, massive fortunes are more often awarded to those patient enough to let the magic compounding strut its stuff over time.
"This time, like all times, is a very good one, if we but know what to do with it."
-- Ralph Waldo Emerson
There's more than enough negativity right now to make you think the Four Horsemen are galloping toward Wall Street. Regardless of how nasty it gets, panicking will get you nowhere fast. By swimming against the current and digging through the carnage of stocks unfairly brutalized by the credit crunch, you can capitalize on investing situations that others were dumb enough to create.
There you have it. Influential, straightforward, and succinct. Check back next week for more simple quotes that will make you a better investor.
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