My investment career stands on the shoulders of giants. Here’s a brief collection of quotes that form the basis of my investment outlook. I consider this the best investment advice of all time, so I hope you enjoy it as much as I do.
Warren Buffett -- “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” I used to love buying “bargain” stocks until I realized how difficult it was to actually realize the liquidation value of poorly run companies. In other words, most bargains are cheap for a reason. Once I switched to paying more for high quality companies, my success improved dramatically. Paying more is ok as along as the growth prospects are worth the price.
Peter Lynch -- “Go for a business any idiot can run – because sooner or later, any idiot probably is going to run it.” When I’m evaluating a business, I make a point of looking at management last. Good businesses have a positive feedback effect that work best when management gets out of the way. I’d much rather invest in average management running a great business than great management running an average business.
Sir John Templeton -- “If you buy the same securities everyone else is buying, you will have the same results as everyone else.” If you hold more than 20 companies (individually or in a fund) your performance will mirror the market over time. If you want to outperform over time, you must be comfortable being highly selective, and only buying the best.
David Tepper -- “There’s no place to hide at [hedge fund] Appaloosa.” Accountability is paramount. Transparency of performance records, investment philosophy, fees, and commentaries keeps you disciplined and focused. 95% of the reason I write these articles is to check in weekly that I’m still following my own advice.
John Bogle -- “Don’t let the miracle of long term compounding returns be overwhelmed by the tyranny of long term compounding costs.” Taxes, inflation, and fees matter. Investors should understand how their performance is affected by these factors, and how to minimize their impact. Paying more for a well-run fund with higher potential returns is a good idea as long as performance outweighs costs over time.
John Maynard Keynes -- “There is no harm in being sometimes wrong – especially if one is promptly found out.” Everyone makes mistakes, and I’ll make my fair share over the rest of my investing career. The key is using a system that recognizes mistakes and doing something about it. Never allow a small mistake to turn into a big one. Honesty, accountability, and discipline are crucial to this process.
Thomas Rowe Price Jr. -- “Most big fortunes result from investing in a growing business.” I don’t know of any legitimate investor who’s correctly and consistently timed bull and bear markets, called swings in commodity prices, prophesized economic recessions, forecasted political elections, predicted the future of interest rates, or the price of rice in China. The best part is none of these things actually matter. A disciplined strategy of buying high quality companies is simple enough it just might work.
Paul Tudor Jones -- “Losers average losers.” This one is a little controversial with certain crowds. I see averaging down on an investment (buying more when price drops) as adding gasoline to the fire. I see the conservative route as buying more of a successful company than adding more to a potential mistake. Like the coach of the 1996 Chicago Bulls, I want to find another Michael Jordan, not increase the salary of my bench warmer.
Ben Kizemchuk is a Portfolio Manager & Investment Advisor with Altus Securities Inc. in Toronto. He offers financial planning and investment management for high net worth Canadian investors. Ben focuses on high quality investments, the Growth and Income Portfolios, low risk investing, and reducing tax.