Top 5 Investing Tips

If you have read up on the history of the stock market and finance, one thing that comes through quite clearly is that the past tends to repeat itself quite often. There’s nothing new under the sun. The first stock market crash happened in 1720: the Mississippi Bubble in France, and the circumstances around it were not too  different from the crashes we have witnessed in recent times.

My point here is, if you are looking to go into business or  the investing world, it helps to borrow from those who have succeeded in the past. Today I share 5 quotes from investment heavy weights that I think would be useful to take to heart.

1. “It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
— Warren Buffett

In this age of social media, this is ever so true. As a businessman, the more you succeed, the more your ethics and personality are under scrutiny. You have got to realize that a good reputation is more valuable than all the money you could make in the world. Fareed Zakaria’s, and closer home Caroline Mutoko’s plagiarism demonstrates that in today, there’s little room for dodgy business practice.
2. “When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett

When you’re going out into the market, you need to decide whether you will be an investor, or a trader. An investor buys into the business and often for the long term, while a trader takes advantage of market movements to buy low and sell high. The former often takes a longer time to see returns but are more assured, while the latter will make quick gains and is more likely to lose money. My personal belief is that an investor should hold good stocks for at least 10 years, unless there are extraneous circumstances that force them to sell.

3. “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.”
— Warren Buffett

Investing in the stock market is more about emotional intelligence than IQ. Most investors are driven by either greed (when buying), or panic (when selling), learning not to succumb to either will make you a success where many have failed.

4. “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”
— Warren Buffett
When investing, we often spend too much time trying to figure out what “the next big thing” is, as opposed to actually evaluating companies that are doing the right thing and investing in them. A study has shown that by the time the general market puts money in “the next big thing”, it’s often on its way down, and most end up losing money. Always invest based on fundamentals and not speculation.
5. “The four most dangerous words in investing are: ‘this time it’s different.'”
— Sir John Templeton

Can we call them the famous 4 words before a crash? As I mentioned in the 1st paragraph, the market is more cyclical than we would like to believe. Spend some time reading about the past, and learn to observe repetitive patterns.

Happy investing!