The best investors, much like the best poker players, are grinders. They don't play for the thrill, and they don't let swings affect their game plan; they play for money. And no movie better embodies these principles than Rounders.
With that in mind, I'll ante up eight great quotes for better investing.
1. "Rule No. 1: Throw away your cards the minute you know they [the cards] can't win."
Value investors love to talk about buying 20-cent dollars -- that is, buying $1.00 of value for just $0.20. That's a great goal.
However, sometimes you're going to end up paying $1.00 for just $0.20 of value. In that case, if the core of the business isn't what you thought it was, quit your whining and cut your losses. According to Peter Lynch, "In this business, if you're good, you're right six times out of 10. You're never going to be right nine times out of 10." In other words, you're going to be wrong sometimes. When you are, own it and get out.
2. "Listen, here's the thing. If you can't spot the sucker in the first half-hour at the table, then you are the sucker."
This is a classic poker line and should be a classic investing line. Don't try to beat Wall Street at its game -- Wall Street will win. Find an edge, and play to your strengths. One way for individual investors to do that is to steer clear of Wall Street's short-term bias and milk time arbitrage -- investing with a long-term focus -- for all it's worth.
3. "Why do you think the same five guys make it to the final table of the Word Series of Poker every year? What, are they the luckiest guys in Las Vegas?"
Great investors are great investors for a reason. They stay within their circle of competence -- meaning they invest in things they understand -- protect against risk, and understand they don't have to play every hand. Berkshire Hathaway's (NYSE:BRK-B) Warren Buffett is a prime example of this as he's said, "The stock market is a no-called-strike game. You don't have to swing at everything -- you can wait for your pitch." And Buffett walks that talk -- stocks like Wells Fargo (NYSE:WFC), Coca-Cola (NYSE:KO), and The Washington Post (NYSE:GHC) have been in the Berkshire Hathaway portfolio for decades.
4. "You can't lose what you don't put in the middle."
This ties into psychology and emotion. Don't invest anything you're not willing to lose, and if your portfolio is cut in half tomorrow, that shouldn't mean you're homeless two days from now.
5. "He beat me... Straight up... Pay him... Pay that man his money."
This line comes from Teddy KGB, a character I see as very similar to Benjamin Graham's Mr. Market. This, admittedly, is a much darker version of Graham's "Here to serve us" Mr. Market. But I see Mr. Market as a poker player with a tell. Every day, he deals you a new hand and he has a new tell. If you can spot that tell, you can exploit it.
6. "They're trying to goad me, trying to own me. But this isn't a gunfight. It's not about pride or ego. It's only about money."
Everyone wants to stand around the water cooler and talk about the big winners they've had -- that's ego. The best investors can check their emotions at the door and focus on making quality, long-term investments.
7. "Always leave yourself outs."
As Buffett famously said, if you were driving a truck that weighted 9,900 pounds, you wouldn't go over a bridge that said "Limit: 10,000 pounds." Instead, you'd wait until you saw a sign that said "Limit: 20,000 pounds." The same goes for investing. Figure out what the business is worth, and then leave some room for error (or, as Buffett would say, margin of safety).
8. "Is that the '88 World Series? Johnny Chan flops the nut straight and has the discipline to wait it out."
Sometimes the best play is to do nothing. Buffett bought shares of Coca-Cola in 1988, and has been checking it down ever since. And you know what? That's what a $9.2 billion hand looks like.