1. On investment Activity
“The stock market is designed to transfer money from the active to the patient.”
2. On investment Costs
“Do not allow the tyranny of compounding costs to overwhelm the magic of compounding returns."
3. On investment Diversification
"Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing."
4. On Active Investing
"It’s not that the game is impossible to win but that the odds are so poor that it’s not prudent to try.”
5. On keeping things simple
"The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”
6. On forecasting
"Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves."
When guessing the flip of a coin, the probability of guessing correctly is fifty percent. If we were to flip a coin twice however, the probability of guessing correctly would be substantially reduced from fifty to twenty five percent. This is the perfect analogy for market timing, an investing strategy in which the investor tries to identify the best times to be in the market and when to get out.
Not only is the investor required to predict when the market is low enough to buy, but they must also predict when it is high enough to sell. This is an immensely challenging proposition, and there are very few (if any) people capable of making such guesses.