In part 1 of this article, we examined five of the most influential single-line quotes from four of history's top investors. Here we take a look at three more thought-provoking quotes from those who know the game best.
"There are all kinds of businesses that I don't understand, but that doesn't cause me to stay up at night. It just means I go on to the next one, and that's what the individual investor should do."
-- Warren Buffett
Many of us don't understand nanotechnology, bioinformatics, or other industries with five or six syllables in their names. If you're trying to predict the future of these companies but don't have the foggiest clue what they do, you're going to be at the whim of innovation that changes faster than you can keep up.
But who doesn't understand what companies like Coca-Cola (NYSE: KO) and Procter & Gamble (NYSE: PG) do? They make products we enjoy, use daily, and will probably keep using for years to come. Those who claim to know exactly what the technology landscape will look like in 10 years are deceiving you and themselves -- but I'd bet my last dollar that people will still be drinking Coke, brushing their teeth, and washing with soap 10 years from now.
"In investing, what is comfortable is rarely profitable."
-- Robert Arnott
Sure, it feels safe to invest in companies everyone loves and owns. The vote of confidence strengthens your position for why you own the stock in the first place. But the problem with going with what's easy is that everyone else is, too. You aren't likely to find much potential in a stock with a rosy consensus; most of the good news is probably already baked into the price.
It's no coincidence that housing-related stocks such as Countrywide Financial (NYSE: CFC) and Pulte Homes (NYSE: PHM) reached their peaks in 2005, when everyone "knew" real estate would go to the moon and never come back. Buying these stocks seemed very safe.
On the flip side, do you think it was safe for investors to pick up shares of wallboard maker USG (NYSE: USG) back in 2003, when its future looked treacherous? Yet going against the grain in situations like these could leave you smiling in the wake of others' confusion. Don't use the crowd's opinion in choosing investments. You'd be better off carrying around a mirror and doing the opposite of what the masses do.
"The market does not beat them. They beat themselves, because though they have brains they cannot sit tight."
-- Jesse Livermore
Face it. The stock market fluctuates -- sometimes in a big way. If you fill up with jubilation or cower in fear at every market turn, yes, the market will end up taking you hostage. Your worst enemy is often that little voice inside you yelling, "Buy, buy! Sell, sell!" and it can cost you huge amounts of money if you listen to it too often.
Frantically buying and selling stocks and trying to time the market is probably about as smart as playing bloody knuckles -- even the winners are idiots. If you stick to your investing strategy, purchase shares of good companies at good prices, and let the rest slide past your ears, you'll probably do well in the long run.
So there you have it, Fools. These short, simple quotes are powerfully rich in meaning. Success in the stock market doesn't require inside information or financial genius -- but it does require a proper temperament and a gut full of common sense.
