In 2012, writing in the Wall
Street Journal, Jason
Zweig penned an article, “Can You Sum Up Your Investing Philosophy in 10
Words?” This semester the students in
Marquette’s AIM program are studying different approaching to investing. They
are starting with understanding investment philosophy.
An investment philosophy is defined
as a coherent way of thinking about markets, how they work (and sometimes do
not) and the types of mistakes that you believe consistently underlie investor
behavior. An investment strategy is actually much narrower – another topic that
the students will be studying this fall.
Zweig asked some leading investors
and financial thinkers for their own contributions. Here are a few:
Determine value.
Then buy low, sell high. ;-)
David Herro, chief investment
officer for international equities, Harris Associates, and manager of Oakmark
International Fund
If everybody wants it,
I don’t. Avoid crowds. Gus Sauter, chief investment officer, the Vanguard
Group
Other people are
smarter than you think they are. Index.
Laurence B. Siegel, research
director, Research Foundation of the CFA Institute
Risk means more things
can happen than will happen. Elroy Dimson, expert on long-term stock returns,
London Business School, and co-author, “Triumph of the Optimists”
Invest for the long
term and ignore interim aggravation. Charles D. Ellis, director, Greenwich Associates,
and author, “Winning the Loser’s Game”
100% of business
value depends on the future. Bill Miller, chairman and chief investment officer,
Legg Mason Capital Management
Plan for the worst.
Hope for the best. Robert Rodriguez, managing partner, First Pacific
Advisors
Control what you can:
your savings rate, costs, and taxes. Don
Phillips, president, fund research, Morningstar
In the end, you cannot
take your investments with you. Meir Statman,
finance professor, Santa Clara University, and author, “What Investors Really
Want”
The less portfolio
management costs, the more you earn. Burton Malkiel, professor of economics emeritus,
Princeton University, and author of “A Random Walk on Wall Street”
Own competently
managed, competitively advantaged businesses at discounted prices. O.
Mason Hawkins, chairman and chief executive officer, Southeastern Asset
Management
Do the math. Expect
catastrophes. Whatever happens, stay the course. William
J. Bernstein, Efficient Frontier Advisors, and author, “The Four Pillars of
Investing”
Fallible, emotional
people determine price; cold, hard cash determines value. Christopher
C. Davis, chairman, Davis Advisors and co-manager, Davis New York Venture Fund
Save. Invest
long-term. Compounding returns builds. Compounding costs destroys. Courage! John
C. Bogle, founder, the Vanguard Group
Are you smarter than
the average professional investor? Probably not. William
F. Sharpe, emeritus professor of finance, Stanford University, and Nobel
Laureate in economics
Spend less.
Diversify globally. Own whatever’s feared, shun whatever’s beloved. Robert
D. Arnott, chairman, Research Affiliates LLC
Finally, it’s worth remembering
that the great investing analyst Benjamin Graham engaged in a similar exercise but came in at seventeen words: Confronted with a like challenge to distill the
secret of sound investment into three words, we venture the motto, MARGIN OF
SAFETY.” Benjamin Graham, “The Intelligent Investor,” Chapter
20.
