Behavior

“Most of the people who have accumulated the greatest wealth in this business have done so not by predicting the future, but by buying companies at such attractive prices, thereby discounting the majority of the problems people fear.”

“As history has taught us, most of the time, most of the crowd moves long after the optimum time to have moved is passed. So it is with investment trends, which start with the belief of a few and end with the conviction of the many.”

“Tradition, sentiment, vague generalizations, unsubstantiated rumors, can never be made the basis of sound investment or intelligent speculation. Now and then large profits are realized on no better foundation — merely proving that sometimes luck laughs at logic.”

“The chief hazard of a careful common stock program is not that it may bring unexpected losses, but that its profits will turn the investor into a speculator greedy for quicker and bigger gains — and therefore headed for ultimate disaster.”

“I think this business of greed — the excessive hopes and fears and so on — will be with us as long as there will be people.”

“Whether stocks rise or fall is determined by innumerable forces and elements, by economic conditions, the actions of governments, the state of international affairs, the emotions of people — even the vagaries of the weather.”

“People invest in stocks for two opposite reasons — in hope and confidence in the future of an enterprise or in fear that the value of their capital will be lost through inflation.”

“There are always reasons why the market is down, and those reasons dominate investor’s consciousness; but current fears are reflected in current prices.”

“One of the enduring features of the findings in behavioral psychology as it applies to finance, a subject I have discussed many times over the years, is the almost complete inability of those who are aware of them to actually apply them.”

“The most valuable asset in investing is not intelligence, but emotional stability.”

“The market is a discounting mechanism for human emotion.”

“The world is not driven by greed. It’s driven by envy.”

“If you totally divorce economics from psychology, you’ve gone a long way toward divorcing it from reality.”

“Behavioral explanations fit the data better than risk-only stories.”

“It turns out that when people have to sell a stock from their portfolio, they are not rational between winners and losers. People tend to sell winners and hang on to their losers. The psychology of that is quite straightforward.”

“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.”

“Herding is not necessarily something one does as the result of analysis. It is what one does when one’s confidence is impaired.”

“I don’t say people are irrational. I speak of reasonableness.”

“If you’re investing with a long time horizon, having an equity bias makes sense; stocks go up in the long run.”

“The underlying driving force behind market timing decisions seems to be emotional — fear, greed, chasing performance — buying something after it has gone up, disappointment, and sales after something has declined.”

“Hoaxes, frauds, manias, and other large-scale financial irrationalities have been with us from the beginnings of the markets in the seventeenth century, long before the Internet.”

“On October 24, 1929, millions of Americans recalled poignantly the hundreds of blithe prophecies that our feelings never again would be harrowed by absurd exhibitions of mob hysteria or mass emotionalism in the stock market. We were living in a new era.”

“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.”

“The human animal never behaves as wisely as he means to, particularly when his counselor is Hope or Fear.”

“Periods of depression invariably follow periods of overoptimism, when fear replaces hope as the controlling emotion.”

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

“By owning great companies, you can just forget about all the noise and the irrational market fluctuations. And slowly get rich.”

“People always have this emotional relationship with stocks, and once they have been bitten by something, it takes a while to get back into it.”

“I know that stocks represent fractional ownership in businesses and that, over time, the stock market will reflect their true intrinsic values. And crises bring worries and fears that make many investors forget that simple fact.”

“It is very hard to think against the crowd, especially when the crowd is practically universal and unanimous in thought and emotion.”

“In order to outperform, by definition, you have to depart from the crowd. You have to hold a different position.”

“Memory – and the resulting prudence – always comes out the loser when pitted against greed.”

“The pendulum of investment psychology is constantly fluctuating between optimism and pessimism, between greed and fear, between credulousness and skepticism, between risk tolerance and risk aversion.”

“The truth is markets are made up of people, with their emotions, insecurities, their tendency to go to extremes, and their other foibles. Thus, they often make mistakes and swing to erroneous extremes.”

“For some reason, because of the way investor psychology works, people switch from only seeing the good to seeing only the bad.”

“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.”

“Valuation tells you what to buy; psychology tells you when to buy it.”

“Crowds are not wise — they are emotional.”

“The pain of missing out is greater than the fear of losing”

“If you are a long term investor, you don’t have to worry about market psychology.”

“The market’s very emotional but over time, doing something logical and systematic does work. The market eventually gets it right.”

“Stoic detachment combined with emotional awareness is the perfect combination for stocks. Feel the fear, but let reason decide.”

“Over the very long run, it is the economics of investing — enterprise — that has determined total return; the evanescent emotions of investing — speculation — so important over the short run, have ultimately proven to be virtually meaningless.”

“Investing is not about IQ; it’s about temperament.”

“Emotional control is an edge.”

“Our expectations of the future are not unbiased and do not reflect all available information.”

“We naturally fear the unknown, and the future is always unknown.”

“Few decisions in life motivated by greed ever have happy outcomes.”

“Volatility provokes the constant dread that some investors know more than we do, making us fearful of ignoring such powerful price movements.”

“Biases don’t cancel out — they compound.”

“Understanding psychology is essential to understanding markets.”

“The market at this point is institutional and we all act like a herd.”

“Gold, much more so than any other commodity, is about sentiment and psychology.”

“The best time to get involved with cyclicals is when the economy is at its weakest, earnings are at their lowest, and public sentiment is at its bleakest.”

“The very existence of doubt creates the conditions for a big gain in the stock once the fears are put to rest. The trick is to put your fears to rest by doing the research and checking the facts — before the competition does.”

“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.”

“For social and sentimental reasons, people have a propensity to want to do really dumb things from time to time.”

“Faith in the future is as much motivated by confidence as it is a reflection of fear in acknowledging a mistake.”

“Discipline comes from the marketplace, from fear of loss and the consequences that come from overindulgence.”

“If the stock market has a period of outperformance of its long-term return, it is inevitably followed by some period of underperformance. But people being optimistic and greedy by nature take the recent short-term outperformance of stocks as a sign of good things to come, rather than a warning of bad things to come.”

“Your own psychology can be your worst enemy as an investor.”

“Being extremely early is tantamount to being wrong, so contrarians are well advised to develop an understanding of the psychology of the sellers.”

“We consider for each of our investments not only whether a security is undervalued but why it is undervalued. If the reason is that there are uninformed or emotional sellers, we become more comfortable.”

“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.”

“People do not consciously choose to invest according to their emotions — they simply cannot help it.”

“There is always a tension in the financial markets between greed and fear.”

“When the next fear-inspired panic occurs, investors’ finger-pointing will almost certainly be aimed outward, while a good part of the blame should instead be directed inward.”

“The crowd is usually right about outcomes, wrong about prices.”

“Odds reflect emotion as much as information.”

“The crowd overpays for certainty.”

“Emotion creates opportunity.”

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

“I like the idea of having a little action. That may not be good from a logical point of view, but it’s good from an emotional point of view.”

“What motivates most gold purchasers is their belief that the ranks of the fearful will grow.”

“There is nothing at all conservative, in my opinion, about speculating as to just how high a multiplier a greedy and capricious public will put on earnings.”

“We live in an investment world, populated not by those who must be logically persuaded to believe, but by the hopeful, credulous and greedy, grasping for an excuse to believe.”

“I have always found it easier to evaluate weights dictated by fundamentals than votes dictated by psychology.”

“You want to be greedy when others are fearful. You want to be fearful when others are greedy. It’s that simple.”

“The fact that people will be full of greed, fear, or folly is predictable. The sequence is not predictable.”

“You need a temperament that neither derives great pleasure from being with the crowd or against the crowd because this is not a business where you take polls, it’s a business where you think.”

“The tour we’ve taken through the last century proves that market irrationality of an extreme kind periodically erupts — and compellingly suggests that investors wanting to do well had better learn how to deal with the next outbreak.”

“When the price of a stock can be influenced by a “herd” on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical.”

“When proper temperament joins with proper intellectual framework, then you get rational behavior.”

“We try to get fearful when others are greedy. We try to get greedy when others are fearful. We try to avoid any kind of imitation of other people’s behavior.”