What great minds like Benjamin Graham and Warren Buffett think about investing—timeless lessons you shouldn't ignore

The India stock markets closed Friday on a strong note amid optimism over a peace deal between the United States-Israel and Iran. There has been volatility globally due to the war, which started on 28 February, and subsequent impact on oil and fuel supply due to the closure of the Strait of Hormuz.

Now, buoyed by easing geopolitical concerns and improving investor sentiment, the overall trend has remained upward, with broader markets outperforming the benchmark indices.

Amid this fluctuation and with no definite end date to the war in sight, we take a look at the top 20 investment tips from the 17 best investors of all time, including Warren Buffett, Benjamin Graham and Peter Lynch. Here are some timeless investment lessons you should not ignore:

Advice on investing goals and temperament

• According to Howard Marks, “Smart investing doesn't consist of buying ‘good’ assets, but of buying assets ‘well’. This is a very, very important distinction that very, very few people understand.”

The meaning of Marks quote is that buying for brand status or hype is counterintuitive for an investor. According to him, your focus should not be on what stocks are doing good, but whether a good stock makes sense for your portfolio. For example, buying only tech stocks because of the Magnificent Seven surge is likely to hit your full portfolio on any one single bad day. But spreading out your allocation between equally good names across categories (e.g. mix of tech, pharma, finance companies etc.) could help keep the value of your investment above water on the worst days.

• Ace investor Warren Buffett notes, “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.”

What Buffett calls for here is discernment and careful consideration before you buy anything. This means that instead of trying to “time” the market, ordinary investors are better off making decisive moves that make sense for their own goals and targets. To be “fearful when others are greedy and greedy only when others are fearful” denotes not making emotional or irrational calls during market highs or lows but sticking to your analysis for what works best for you.

• The sentiment is also shared by Buffett's guru, Benjamin Graham. Who noted, “It is absurd to think that the general public can ever make money out of market forecasts.”

According to Graham, the general public is not technically or by experience equipped to make predictions about how the markets could perform. Even experts admit they sometimes made mistakes, had bad calls, pulled out too early or skipped on something that turned to be gold.

• John Templeton said, “For all long-term investors, there is only one objective — maximum total real return after taxes.”

Here Templeton notes that long-term investing is more about the results rather than the stops on the way. If at the end of your tenure, your investment has gained its potential compared to where to started, the ups and downs in the middle years do not matter. The advice is important to remember when spooked by short-term disruptions to stock prices.

• Billionaire George Soros noted, “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”

Here, Soros notes that while the movies make stock investing seem like a high powered 24x7 on-the-go mission that reaps immediate rewards. The reality for most investors is more simple. There is not continous stock price tracking, short strategies or options games that is viable in the long-run. For most investors, the best bet could be sticking to the boring long-term investment route.

On being prepared for downturns

• Businessman Jack Bogle stated: “If you have trouble imaging a 20% loss in the stock market, you shouldn't be in stocks.”

The point here is that you should not be putting your life savings into the uncertain and volatile stock markets. While high reward, the high risk is a real factor, and many investors have been victim to wipeouts when they enter the stock markets with rose coloured glasses or expectations of immediate wealth.

• Businessman Bob Farrell also warned that the stock markets are fickle. “The public buys the most at the top and the least at the bottom.” adding that “When all the experts and forecasts agree — something else is going to happen.”

His statements advice that investors be prepared for the possibility that even the “surest” bet could fail.

• Jeremy Grantham noted the dichotomy and conflict of interest. “By far the biggest problem for professionals in investing is dealing with career and business risk — protecting your own job as an agent. The second curse of professional investing is over-management caused by the need to be seen to be busy, to be earning your keep. The individual is far better-positioned to wait patiently for the ‘Right Pitch’ while paying no regard to what others are doing, which is almost impossible for professionals.”

Granthan notes that ordinary investors have a much better choice to make decisions that are tailored in their own best interest compared to professionals, who aim to show good returns, but have to show that they are “working”, even when sitting for the long game is the wiser choice.

On how gaining knowledge to make right choices

• According to billionaire investor Peter Lynch, “Investing without research is like playing stud poker and never looking at the cards.”

He notes that making decisions without knowledge of what you are wading into, choosing over the other options, or the consequences is going down a road that leads to loss. This is a advice also repeated by Berkshire Hathaway's Warren Buffett and Charlie Munger, who often encourage only investing in businesses you understand.

• Money manager Barton Biggs has a more technical take, noting, “Quantitatively based solutions and asset allocation equations invariably fail as they are designed to capture what would have worked in the previous cycle whereas the next one remains a riddle wrapped in an enigma.”

The point here is very similar to Bob Farell and Benjamin Graham's quotes. Making decisions based on hype or past performance is only sustaining to some end. Beyond a point, no one can predict the market, world events or other complications that make kings and paupers of companies on the exchanges.

• Growth investing ace Philip Fisher concurred, “The stock market is filled with individuals who know the price of everything, but the value of nothing.”

The point here is that a stock worth ₹1,000 could tank to ₹800 based on data on any given day. While unusual, investors must be prepared for the uncertainty.

• Ken Fisher added, “You can’t develop a portfolio strategy around endless possibilities. You wouldn’t even get out of bed if you considered everything that could possibly happen... You can use history as one tool for shaping reasonable probabilities. Then, you look at the world of economic, sentiment and political drivers to determine what’s most likely to happen—While always knowing you can be and will be wrong a lot.”

In the same vein as the others, the analyst acknowledges that beyond reasonable possibilities, even the highest investment authority, cannot predict how the markets may turn and what works or doesn't.

On risk management and expectations

• Charles Ellis stated, “The average long-term experience in investing is never surprising, but the short-term experience is always surprising. We now know to focus not on rate of return, but on the informed management of risk.”

An often-repeated refrain among experts. Ellis also feels that there is no timing the market. Based on circumstances, you could make big bucks on one short-term investment, but that would be like lightening in the bottle — something that cannot be replicated. Overall, the long-term is guaranteed to make you money based on the power of compounding.

• Fund manager Bill Miller stated, “The market does reflect the available information, as the professors tell us. But just as the funhouse mirrors don't always accurately reflect your weight, the markets don't always accurately reflect that information. Usually, they are too pessimistic when it's bad, and too optimistic when it's good.”

The point here is that the good and bad times and part of a cycle. Troughs are not the end of the world, and highs will not realistically last without a dip. Thus, instead of overt optimism or pessimism based on stock prices, the middle road is a wiser choice, as per Miller.

On understanding the principles

• Investment firm chief Thomas Rowe Price Jr noted, “Every business is manmade. It is a result of individuals. It reflects the personalities and the business philosophy of the founders and those who have directed its affairs throughout its existence. If you want to have an understanding of any business, it is important to know the background of the people who started it and directed its past and the hopes and ambitions of those who are planning its future.”

An important factor to running a business, is anticipating or being prepared for the various decisions along the way. Price's quote notes that good businesses come with some unshakeable fundamentals, and this includes a management team that knows what it is doing. If the leaders have a clear vision, mapped pathway and qualities to take the decisions through, it tells you about the future of a company and whether it is a good investment over the long run.

• Businessman and investor Carl Icahn states, “We have bloated bureaucracies in corporate America. The root of the problem is the absence of real corporate democracy.”

Icahn has over the years expressed the view that there is policy problem with how corporate America is governed, noting that with some exceptions, “wrong people” are running US companies. He believes that lack of liquidation of bad businesses and protection of bad management by boards takes away value for stakeholders.

• American investor John Neff feels, “It's not always easy to do what's not popular, but that's where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognized.”

Neff proposes taking calculated risks when investing in the markets, even if your choice is not the popular one. This one may not be everyone's cup of tea, but for the more seasoned, once you know what works for you, following your own analysis may pay off better than following the herd, he feels.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.