Burton Malkiel Quotes Page 2

“Put time on your side. Start saving early and save regularly. Live modestly and don't touch the money that's been set aside.”

“Res tantum valet quantum vendi potest. (A thing is worth only what someone else will pay for it.)”

“Stupidity well packaged can sound like wisdom.”

“The greatest of all gifts is the power to estimate things at their true worth.”

“The harsh truth is that the most important driver in the growth of your assets is how much you save, and saving requires discipline. Without a regular savings program, it doesn’t matter if you make 5 percent, 10 percent, or even 15 percent on your investment funds. The single most important thing you can do to achieve financial security is to begin a regular savings program and to start it as early as possible. The only reliable route to a comfortable retirement is to build up a nest egg slowly and steadily. Yet few people follow this basic rule, and the savings of the typical American family are woefully inadequate. It is critically important to start saving now. Every year you put off investing makes your ultimate retirement goals more difficult to achieve. Trust in time rather than in timing. As a sign in the window of a bank put it, little by little you can safely stock up a strong reserve here, but not until you start.”

“The index performance is not mediocre—it exceeds the results achieved by the typical active manager.”

“The public realized that an excess of paper currency creates no real wealth, only inflation.”

“There are four factors that create irrational market behavior: overconfidence, biased judgments, herd mentality, and loss aversion.”

“There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich.”

“Trust in time rather than timing.”

“Two behavioral economists, Terrance Odean and Brad Barber, examined the individual accounts at a large discount broker over a substantial period of time. They found that the more individual investors traded, the worse they did. And male investors traded much more than women, with correspondingly poorer results.”

“Two-thirds of professionally managed funds are regularly outperformed by a broad capitalization-weighted index fund with equivalent risk, and those that do appear to produce excess returns in one period are not likely to do so in the next. The record of professionals does not suggest that sufficient predictability exists in the stock market to produce exploitable arbitrage opportunities.”

“You will never be allowed to buy the really good IPOs at the initial offering price. The hot IPOs are snapped up by the big institutional investors or the very best wealthy clients of the underwriting firm.”

“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.”

“And you must have both the cash and the confidence to continue making the periodic investments even when the sky is the darkest. No matter how scary the financial news, no matter how difficult it is to see any signs of optimism, you must not interrupt the automatic-pilot nature of the program. Because if you do, you will lose the benefit of buying at least some of your shares after a sharp market decline when they are for sale at low-end prices. Dollar-cost averaging will give you this bargain: Your average price per share will be lower than the average price at which you bought shares. Why? Because you’ll buy more shares at low prices and fewer at high prices.”

“As an investor, you have one powerful way to keep from getting distressed by devilish Mr. Market: Ignore him. Just buy and hold one of the broad-based index funds that.”

“As in so many human endeavors, the secrets to success are patience, persistence, and minimizing mistakes. In driving, it’s having no serious accidents; in tennis, the key is getting the ball back; and in investing, it’s indexing—to avoid the expenses and mistakes that do so much harm to so many investors.”

“Avoiding serious trouble, particularly troubles that come from incurring unnecessary risks, is one of the great secrets to investment success. Investors all too often beat themselves by making serious—and completely unnecessary—investment mistakes.”

“By buying a share in a total market index fund, you acquire an ownership share in all the major businesses in the economy. Index funds eliminate the anxiety and expense of trying to predict which individual stocks, bonds, or mutual funds will beat the market.”

“Diversify across securities, across asset classes, across markets—and across time.”

“Finding the next Warren Buffett is like looking for a needle in a haystack. We recommend that you buy the haystack instead, in the form of a low-cost index fund.”

“High-quality bonds can moderate the risk of a common stock portfolio by providing offsetting variations to the inevitable ups and downs of the stock market”

“Investors should avoid any urge to forecast the stock market. Forecasts, even forecasts by recognized experts, are unlikely to be better than random guesses. “It will fluctuate,” declared J. P. Morgan when asked about his expectation for the stock market. He was right. All other market forecasts—usually estimating the overall direction of the stock market—are historically about 50 percent right and 50 percent wrong. You wouldn’t bet much money on a coin toss, so don’t even think of acting on stock market forecasts.”

“Nobody knows more than the market.”

“One asset class that belongs in most portfolios is bonds. Bonds are basically IOUs issued by corporations and government units.”

“One of the most important lessons you can learn about investing is to avoid following the herd and getting caught up in market-based overconfidence or discouragement.”

“Only liars manage always to be out of the market during bad times and in during good times.”

“Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

“Predicting the stock market is really predicting how other investors will change estimates they are now making with all their best efforts. This means that, for a market forecaster to be right, the consensus of all others must be wrong and the forecaster must determine in which direction-up or down-the market will be moved by changes in the consensus of those same active investors.”

“Protect yourself: Every investor should always diversify.”