Great investors summarize their investment philosophies.
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 the topic of understanding different investment philosophies.
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 AIM 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
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.
Warren
Buffett is the most successful investor of our time, perhaps of any time. He is
famous for his pithy and witty quotes, which often appear in his annual letter
to shareholders. Taken together, his quotes pretty well sum up his investment
philosophy and approach. Here are his best sound bites on investing:
·
Rule
No.1: Never lose money. Rule No.2: Never forget rule No.1.
·
Never
invest in a business you cannot understand.
·
I put
heavy weight on certainty. It's not risky to buy securities at a fraction of
what they're worth.
·
If a
business does well, the stock eventually follows.
·
It's far better to buy a wonderful company at
a fair price than a fair company at a wonderful price.
