Aging

“The tools that get investors and speculators in and out of the market only after some widely followed average has turned must obviously exaggerate the movements of the market.”

“Our ideas and policies are all structured with one goal in mind: to cultivate a culture that encourages rational decision making that ultimately leads to solid risk-adjusted returns”

“You never get a bubble until the public, the brokerage community, the financial institutions, the pension funds, and even the universities are all involved.”

“Good ideas and good products are a dime a dozen. Good execution and good management — in a word, good people — are rare.”

“The biggest problem in starting high-tech businesses is the shortage of superior managers. There is too much money chasing too few good managers.”

“Most portfolio managers still pursue the elusive goal of “better than the market” performance. However, one should not dismiss the general premise because of its uncomfortable conclusions.”

“Knowledge of the past is indispensable to understanding and managing the future.”

“Current earnings, future prospects, management, marketability are all factors more or less independent of assets which contribute their share to the intrinsic value.”

“I don’t think the objective of investment should ever be to take a risk in order to get a return. I think the objective of shrewd investment should be to find opportunities which offer a larger return than the average, combined with adequate safety.”

“Please do not forget that as the common stock level advances, the advantages of common stocks appear to be more attractive and the basic need for owning them becomes more persuasive in everybody’s reasoning. Yet in fact, common stocks undoubtedly become riskier as the price advances, and thus the risk increases as the widespread acceptance of common stock develops.”

“Perhaps nothing is more indicative of the quality of a company’s management than its accounting methods.”

“To my mind, the so-called growth-stock investor — or the average security analyst for that matter — has no idea of how much to pay for a growth stock, how many stocks to buy to obtain the desired return, or how their prices will behave.”

“Real investment risk is measured not by the percent that a stock may decline in price in relation to the general market in a given period, but by the danger of a loss of quality and earning power through economic changes or deterioration in management.”

“If all that can be promised is an average result, how can managers expect to be paid large fees for providing that average result?”

“I insist that more damage has been done to stock values and to the future of equities from inside Wall Street than from outside Wall Street.”

“It may be that professionally managed funds are too large a part of the total picture to be able to outperform the market as a whole; it may also be true, as I suspect, that certain weaknesses in their basic principles of stock selection tend to offset the superior training, intelligence, and effort that they bring to this task.”

“The problem of investment in common stocks is either to insulate yourselves from the speculative influences, or else to adjust your investment policy so that you can take advantage of the speculative fluctuations that are imposed upon the basic investment quality of common stocks.”

“There are two principal mistakes that nearly all amateurs in the stock market make. The first is to have an inexact knowledge of the securities in which one is dealing, to know too little about a company’s management, its earnings, and prospects for future growth. The second mistake is to trade beyond one’s financial resources, to try to run up a fortune on a shoestring.”

“By the time market declines (or advances) are front-page news, they usually have run their course.”

“Two things seem pretty clear to me: first, no one can consistently buy at the low or sell at the high (except liars, as Bernard Baruch said), and second, lowest average cost wins.”

“Active managers are paid to add value over what can be earned at low cost from passive investing, and failure to do that is failure”

“About the only advantage of being old in this business is that you have seen a lot of markets, and sometimes market patterns recur that you believe you have seen before.”

“Our approach can be summarized with the phrase “lowest average cost wins.””

“What these companies do is try to put the best spin or face on their situation. Rarely will managements tell you how bad things are.”

“The biggest problem that people have isn’t selecting the right money managers. It’s the way they change managers all the time in response to fluctuations of short-term performance.”

“Managers should start out with the belief that if they are trying to actively manage money and outperform the market, the odds are against them.”

“Passive management does not give investors the return of the index; it gives them the return of the index less costs. So, the longer they have their money passively managed, the greater their underperformance will be relative to the index.”

“Large losses are forever – in investing, in teenage driving, and in fidelity. If you avoid large losses with a strong defense, the winnings will have every opportunity to take care of themselves. And large losses are almost always caused by trying to get too much by taking too much risk.”

“Wall Street is pure economics and when profit opportunities look good, debt leverage makes them look better.”

“Contrary to their oft-articulated goal of outperforming the market averages, investment managers are not beating the market: The market is beating them.”

“I think the management should tell it like it is at all times and not be a big promoter of its own stock.”

“Beating the market averages, after paying substantial costs and fees, is an against-the-odds game; yet a few people can do it, particularly those who view it as a game full of craziness with an occasional mispriced something or other.”

“Beating the market averages, after paying substantial costs and fees, is an against-the-odds game; yet a few people can do it, particularly those who view it as a game full of craziness with an occasional mispriced something or other.”

“Perhaps the most important rule in management is “Get the incentives right.””

“The whole trick of the game is to have a few times when you know that something is better than average and invest only where you have that extra knowledge.”

“Averaged out, betting on the quality of a business is better than betting on the quality of management. In other words, if you have to choose one, bet on the business momentum, not the brilliance of the manager.”

“There are huge advantages for an individual to get into a position where you make a few great investments and just sit back. You’re paying less to brokers. You’re listening to less nonsense.”

“Money managers are not stupid. They realize that sticking one’s neck out and producing short-term under performance that differs from an index that is used as the benchmark is risky.”

“If a money manager cannot explain in plain English what their investment principles are, they probably don’t have any. And if they cannot explain their process for finding and researching an investment idea, they probably don’t have that either.”

“He exploits the quality minus junk factor with leverage”

“One of the major differences between behavioral economics and standard economics is that, in standard economics, the individual agent is supposed to be driven or motivated by the utility of future wealth and discounted future wealth and present wealth. In behavioral economics, agents are supposed to be motivated by something else: gains and losses.”

“The mutual fund industry is not an investment management industry. It’s a marketing industry.”

“I find that retirement savings is individual specific. There’s not one cookie-cutter answer for everybody.”

“Casino gambling with a system where you have the edge is a wonderful teacher for elementary money management.”

“The public today is just as eager to buy a mystery as it was fifteen years ago or fifty years ago. The psychology of greed and cupidity has not changed appreciably.”

“All booms are alike. The stage setting varies, but fundamentally they are as drops of water. Customs, like costumes, change from force of environment and economic conditions, but human nature remains the same.”

“For years I have contended that the average speculator does not lose his money in Wall Street. He loses it wherever he happens to be the instant he decides to let the ticker put unearned dollars in his pocket. The game does not beat the player; he beats himself.”

“I think I am safe in asserting that the margin trader, speculator, gambler, or whatever you choose to designate the average man who goes to Wall Street after easy money, does not lose money when he sells. He loses it when he buys!”

“Greed is a bandage which a higher power sometimes binds across the eyes of reason.”

“The principle of “managed” investment trusts is absolutely sound, granted only one premise. The premise is that there are somewhere people of such experience and insight that they can predict with some sort of accuracy the future behavior of securities.”

“Our attitude toward cash generation and asset management came out of our own thought process. It is not copied. After we acquired a number of businesses we reflected on aspects of business. Our own conclusion was that the key was cash flow.”

“There’s nothing you can do in the interest of being above average that does not expose you to the risk of being below average.”

“I believe denying clients the ability to be hyper-traders is doing them a favor. Most people are not adept enough to take advantage of short-term mis-valuations, and I put myself in that category.”

“Superior investing is taking advantage of the errors of others.”

“One of the astute things I was taught is that on average, the average investor does average before fees, and below average after fees.”

“The important thing to remember about investing is that it is not sufficient to set up a portfolio that will survive on average. The key is to survive at the low ends.”

“Investing is a funny business. It’s really easy to be average. Just buy an index fund. It’s really hard to be above average.”

“The concept of surviving on average is irrelevant. You have to survive every day. Which means, really, that you have to survive on the bad days.”

“I’ve heard it said that an economist is a portfolio manager who never marks to market.”

“On average, the average large-stock fund manager produces average returns before fees and below-average returns after fees. So compared with after-fee returns, an index fund is superior.”

“Most of us have roughly the same ability to predict the future. The trouble is, being right as often as the average forecaster won’t produce superior results.”

“Investment survival has to be achieved in the short run, not on average in the long run.”

“A great mob of easily led investors, eagerly searching for “straight tips” which may bring instant wealth, make their mistake in common, and when the mistake is disastrous they try, en masse, to escape.”

“We look at the management of corporations that tend to overstate or massage profits as promoters. And that is a kind word.”

“The best investors I’ve seen all have an above-average ability to change their mind.”

“When investors — individual and institutional alike — engage in far more trading –inevitably with one another — than is necessary for market efficiency and ample liquidity, they become, collectively, their own worst enemies.”

“It’s now a rent-a-stock industry, compared with the old own-a-stock industry when turnover was 16 percent and the average holding period was six years.”

“If your preference is managed funds, you want a managed fund that, one might put it, is like a sailboat fighting not a typhoon of costs but only a breeze.”

“Businessmen play a mixed game of skill and chance, the average results of which to the players are not known by those who take a hand.”

“There is no clear evidence from experience that the investment policy which is socially advantageous coincides with that which is most profitable.”

“When you get to these frenzied markets, it drives managements or portions of managements to hanky-panky.”

“Investing success comes from a few great decisions, not many average ones.”

“Patience is a competitive advantage.”

“One of the things I have learned over the years is how important management is in building or subtracting from value.”

“An investor is not likely to obtain superior results by buying a broad cross-section of the market. The more diversification, the more performance is likely to be average, at best.”

“You can only know so many companies. If you’re managing 50 or 100 positions, the chances that you can add value are much, much lower.”

“If I’ve made one mistake in the course of managing investments it was selling really good companies too soon. Because generally, if you’ve made good investments, they will last for a long time.”

“Leverage removes the ability to wait.”

“Having a mutual fund management company is like having a toll booth on the George Washington bridge all for yourself.”

“We don’t get involved in all the analytical baggage of trying to figure out where a stock is going to sell. Just try to figure out what it’s worth. And I dare say all the really great investors do it the same way.”

“A sustainable competitive advantage allows a firm to earn excess returns for longer.”

“Time arbitrage exists because most investors cannot wait.”

“Patience is a competitive advantage”

“When you look carefully at the economics of shorting, it makes no sense to take the bet. The lowest price a company’s stock can go to is zero, but there’s an unlimited upside. An unleveraged short position has a maximum payoff of 2:1.”

“The compounding of shared advantages is immense.”

“Owning a few exceptional businesses beats owning many average ones.”

“Inactivity is a competitive advantage.”

“We partner with managers who behave like owners.”

“Risk management means protecting oneself from the adverse and unexpected decisions others may make and, in the process, making better decisions than they do.”

“Neither the corporate executive nor the investment manager can allow himself to be lulled into the belief that any company, regardless of its record of achievement, must necessarily provide satisfactory rates of growth.”

“The road to successful investing is paved with independence of spirit, decisiveness, and the courage of one’s convictions.”

“In the end, risk management is about consequences.”

“The greatest tragedies occur when people forget about uncertainty.”

“Managers do not create large alphas by being conventional. They do so by taking the risk of being wrong and alone.”

“The trick in risk management is in recognizing that normal is not a state of nature, but a state of transition and that trend is not destiny.”

“You don’t have to be brilliant — just less stupid than average.”

“The thesis underlying everything, whether you’re an actively managed fund or a passive fund, is that the U.S. will be OK. If you don’t believe that, you shouldn’t be in the stock market.”

“The strength of our economy is that it is dynamic and always adapting to changing conditions. That’s our advantage in the world.”

“If it’s a choice between investing in a good company in a great industry, or a great company in a lousy industry, I’ll take the great company in the lousy industry any day. Good management, a strong balance sheet, and a sensible plan of action will overcome many obstacles, but when you’ve got weak management, a weak balance sheet, and a misguided plan of action, the greatest industry in the world won’t bail you out.”

“A lot of mutual fund managers don’t know what they own. The odds are the best they have ever been for the individual.”

“There’s a psychological benefit to tossing the bums out: The names disappear from the monthly brokerage statements; we’re no longer reminded of our mistakes.”

“Fast-growing companies can’t be expected to keep up the pace forever. Eventually, they reach middle age and lose some of their oomph, just like the rest of us.”

“My idea of a great business is one that has a shortage of competitors.”

“When I ran Magellan Fund, the market had 9 declines of 10 percent or more in those 13 years. I had a perfect record. All 9 times, my fund went down.”

“The real problem is not finding a good fund manager, it’s finding the right time horizon for your investing and what your temperament is for volatility.”

“If the balance sheet figures look right, I come to the next and hardest part — appraising management.”

“I’m an optimist, both as a person and an investor. It’s a big mistake to be pessimistic as long as we have a viable civilization which is reasonably well managed.”

“If a company has a sound balance sheet with minimal long-term debt, good growth prospects and responsible management, then the stock should be interesting.”

“If managers can’t think of anything else to do with their money they should pay dividends. If they have good places to invest it, that’s much better.”

“If some of the most astute people in Wall Street have frequently guessed wrong in trying to profit by stock market movements, it may not be too much to assume that the attempt itself has represented a misconception of the proper function of management.”

“Despite the advantages of size, wealth, a good name and a long tradition, a large enterprise will cease to be profitable if the men at the head get hardening of the arteries or atrophy of the brain tissue or if their heirs prove unequal to inherited responsibilities. Momentum alone will not carry a business forward under such circumstances. Some younger and more aggressive group will assume the leadership of the industry.”

“The general state of business thus does not forecast the course of stock prices except in the apparently paradoxical fashion that great prosperity affords an advantageous time for selling stocks, extreme business depression an opportunity for purchase.”

“The average trader is naturally a chronic bull. It is human nature to prefer optimism to pessimism.”

“In a public service corporation, bad management may curtail profits or produce losses, good management may turn a weak corporation into a strong one.”

“Most useful and most dangerous are the stock market averages, most useful in revealing the general trend of the market, most dangerous if they mislead the trader into forgetting that, after all, his profits depend on the movements of the individual stocks in which he deals.”

“Bull markets and bear markets last long enough so that the average trader is likely to forget by the time the climax is approaching that any sort of movement is possible.”

“To consider stocks by groups rather than by individual companies is further to ignore the vital factor of management.”

“I have stressed management, but even so, I haven’t stressed it enough. It is the most important ingredient.”

“Buy slowly stocks of companies that will capitalize on the problems of scarcity and social need. Companies with excellent management.”

“I want companies that welcome dissent, rather than stifle it, that don’t penalize people who criticize what management is doing.”

“I think you have to be an undying optimist, and perhaps a Pollyanna to enjoy and to be successful at managing common stock portfolios over a long period of time.”

“To beat the market is not easy. In addition to a good investment manager, the investor needs perspective, patience, and courage — qualities that do not abound in today’s intensely competitive world.”

“A good record doesn’t necessarily prove good management. Outside economic factors such as the business cycle can make any company look good for a while.”

“Good management has an extraordinary way of making money for you, and bad management, no matter how favorable the environment, has a way of missing opportunities.”

“The market gets obsessed with quarterly results when there are surprises, when management is surprised. And management, as you well know, usually is.”

“For me, business is not a battle to be waged — it’s a puzzle to be solved.”

“People have always made money by taking advantage of inefficient markets.”

“People think they’re hiring a manager to make them money. But probably, they’re hiring a manager to keep them out of trouble and maybe fight their own instincts sometimes.”

“The laws of probabilities tell us that almost anyone can achieve phenomenal success over any given measurement period. It is the task of those evaluating a money manager to ascertain how much of past success is due to luck and how much to skill.”

“In my experience, large increases in assets under management adversely affect returns.”

“I think it would be an interesting change for integrity if managers of funds were required to have more of their own money in them.”

“Value investing is, at its core, the marriage of a contrarian streak and a calculator.”

“It is always easiest to run with the herd; at times, it can take a deep reservoir of courage and conviction to stand apart from it. Yet distancing yourself from the crowd is an essential component of long-term investment success.”

“Higher risk investments often erode one’s capital and produce lower returns — the worst of all investment worlds. Higher-returns-for-higher-risks only applies on average and over time.”

“Mutual fund managers, desperate to put cash to work don’t buy what is cheap but what is working since what is cheap by definition hasn’t been working.”

“I’ve thought a lot of things when I’m managing money with great, great conviction, and a lot of times I’m wrong. And when you’re betting the ranch and the circumstances change, you have to change, and that’s how I’ve always managed money.”

“Every great money manager I’ve ever met, all they want to talk about is their mistakes. There’s a great humility there.”

“No edge survives poor bankroll management.”

“I’ve made so many mistakes over the years that I struggle to isolate just one as the biggest single mistake. Among the choices though I think excessive leverage has been the most personally painful.”

“Successful investing requires the management of your own ego and temperament and usually that of your clients as well.”

“As an investor in businesses, which generate enormous cash flows, my single most important issue to get right is what management will do with cash flow through reinvestment. Do they care about the owner, or do they care about themselves?”

“Sadly, on Wall Street, rewards for acting with self-interest and to disadvantage public shareholders often prove to be too tempting.”

“Be careful of leverage. It can go against you.”

“In general, the batting average of doomsayers in the U.S. is terrible. Our country has consistently made fools of those who were skeptical about either our economic potential or our resiliency.”

“It is obvious that a variation of merely a few percentage points has an enormous effect on the success of a compounding (investment) program. It is also obvious that this effect mushrooms as the period lengthens.”

“I believe the investor operates at a distinct advantage when he is aware of what path his thought process is following.”

“The availability of a quotation for your business interest (stock) should always be an asset to be utilized if desired. If it gets silly enough in either direction, you take advantage of it. Its availability should never be turned into a liability whereby its periodic aberrations, in turn, formulate your judgments.”

“We don’t go into companies with the thought of effecting a lot of change. That doesn’t work any better in investments than it does in marriages.”

“I feel the same way about managing that I do about investing: It’s just not necessary to do extraordinary things to get extraordinary results.”

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”

“When a manager with a reputation for brilliance tackles a business with a reputation for bad economics, the reputation of the business remains intact.”

“Any time you offer a big prize for a small amount of money, you encourage stupid behavior on behalf of those you’re appealing to.”

“The disadvantage of being in any kind of a market type environment – Wall Street would be the extreme – is that you get over-stimulated. You think you have to do something every day.”

“If you are not a professional investor, if your goal is not to manage money in such a way so you get a significantly better return than the world, then I believe in extreme diversification.”