During tumultuous times, it can be reassuring to listen to the advice from well-known and successful investors, says Ken Fisher in a recent video on the Fisher Investments YouTube channel, and he relates some of his favorite quotes from legendary investors both present and past.
Sir John Templeton used to say that the “4 most dangerous words in the English language are ‘it’s different this time.’” The reality is that every market situation is always different, but there are also always similarities to times before.
Benjamin Graham, father of security analysis, used to say that investors’ main problem is actually themselves; how your investment behaves is actually much less important than how you behave. It can be a difficult lesson to learn, but during volatile times, when emotions are running high, it’s self-control that matters the most—a theme that Fisher comes back to again and again.
Peter Lynch, who ran the Magellan Fund for 13 years, garnered very high returns over that period, though he is quick to point out the 9 times when he actually trailed the market. In spite of that, he still beat the market overall—because he held to his convictions during those downturns and didn’t allow his behavior to be influenced by the market’s behavior. Fear can be a powerful motivator, tempting people to do things that hurt them, such as selling off before the market hits bottom.
Mellody Hobson, president of Ariel Investments, has often said that “bravery is not the absence of fear, it’s overcoming it.” That harkens back to Graham’s advice, that it’s not how the market behaves, it’s how you behave.
Fisher also quotes 19th century financier Bernard Baruch, who would say that the fundamental issue with the stock market is that the information is filtered to us “through the framework of human emotions.” In a market like the one we’ve seen this year, how you handle your emotions is more important than how you handle your stocks. Downturns create the fear that the market will never rebound, even though it has, every time, throughout history. And fear, which sells newspapers, doesn’t make money. It isn’t so much the market dips that cause problems; rather, it’s when investors tap out of the market too quickly during those dips that the majority of the damage is done. Likewise, waiting too long after selling off to get back into the market can also cause a lot of damage, because you run the risk of being priced out. Stocks are one of the few things that people like less when the prices are low than when they are higher, when in fact it should be the other way around, Fisher tells the viewers.