William J. Bernstein Quotes

“Although you should not let your emotional responses dictate your allocation, you do need to sleep at night, and your personal preferences are an important part of your asset class structure.”

“An index fund dooms you to mediocrity? Absolutely not: It virtually guarantees you superior performance.”

“How do you avoid overconfidence? By telling yourself at least a few times per year, 'The market is much smarter than I will ever be.'”

“If you are such an individual and become upset when one of your asset classes does poorly, even when the rest of your portfolio is doing well, then you should not be managing your own money.”

“If you’ve won the game, stop playing.”

“It’s human nature to find patterns where there are none and to find skill where luck is a more likely explanation.”

“Market history shows that when there’s economic blue sky, future returns are low, and when the economy is on the skids, future returns are high.”

“There are only two kinds of investors: those who don’t know where the market is headed, and those who don’t know that they don’t know. Then again, there is a third kind: those who know they don’t know, but whose livelihoods depend on appearing to know.”

“Although the modern image of the imperial city is dominated by the ruins of the Coliseum and the Forum, the economic life of ancient Rome centered on side streets filled with apartments, shops, and horrea.”

“The best fishing is done in the most stormy waters.”

“Would you believe me if I told you that there’s an investment strategy that a seven-year-old could understand, will take you fifteen minutes of work per year, outperform 90 percent of finance professionals in the long run, and make you a millionaire over time? Well, it is true, and here it is: Start by saving 15 percent of your salary at age 25 into a 401(k) plan, an IRA, or a taxable account (or all three). Put equal amounts of that 15 percent into just three different mutual funds: A U.S. total stock market index fund An international total stock market index fund A U.S. total bond market index fund. Over time, the three funds will grow at different rates, so once per year you’ll adjust their amounts so that they’re again equal. (That’s the fifteen minutes per year, assuming you’ve enrolled in an automatic savings plan.) That’s it; if you can follow this simple recipe throughout your working career, you will almost certainly beat out most professional investors. More importantly, you’ll likely accumulate enough savings to retire comfortably.”

“First, we invest now so that we may spend later. In fact, this is the essence of investing: the forbearance of immediate spending in exchange for future income. Because of the mathematics of compound interest, spending even a tiny fraction on a regular basis devastates final wealth over the long haul.”

“Ideally, a fine painting, like a house, is neither a speculation nor an investment; it is a purchase. Its value consists solely of the pleasure and utility it provides now and in the future. The dividend the painting provides is of the non-financial variety.”

“If you can understand the chapter’s central point—that the value of a stock or a bond is simply the present value of its future income stream—then you will have a better grasp of the investment process than most professionals.”

“Only an income-producing possession, such as a stock, bond, or working piece of real estate is a true investment.”

“The easiest way to get rich is to spend as little as possible.”

“Do not trust historical data—especially recent data—to estimate the future returns of stocks and bonds. Instead, rely on interest and dividend payouts and their growth/failure rates.”

“I see the supposed convenience of being able to trade ETFs throughout the day as a psychological disadvantage. Unless you are able to predict intraday market moves—a fool’s errand if ever there was one—you are faced with the oftentimes paralyzing choice of exactly when to buy or sell.”

“The reason that 'guru' is such a popular word is because 'charlatan' is so hard to spell.”