Who better to ask for investment advice than those who have a proven track record as successful investors? We will take a look at some quotations from famous investors and other players in the financial markets. We will also examine their words more closely to see what they are really saying and how their advice can be applied to your investment portfolio.
Paul Wolfowitz – Former President of the World Bank Group and former US Deputy Secretary of Defense
“I think it’s a mistake to rely too much on any one economic factor. It’s why investors try to spread their portfolio round.”
This advice is often given to novice investors – it is extremely important to diversify the assets making up your portfolio and thus diversify the risk. A diverse portfolio gives the best chance of realising a return on your investments.
Warren Buffet – One of the world’s richest men and an American business magnate, investor and philanthropist
“Wide diversification is only required when investors do not understand what they are doing.”
At first glance, this statement may seem to contradict the one above, but that is not the case. For novice investors, diversification is the key to investment success. A professional investor should have more information at his or her fingertips and, the more knowledgeable you become, the more you can streamline your investments. If anyone is worth taking investment advice from then it is Warren Buffet, who is widely regarded as the most successful investor in history.
Kenneth Lay – American businessman best known for his role in the downfall of Enron
“Investors don’t like uncertainty.”
This may seem obvious but it is important to note that uncertainty is not the same thing as risk. We need risk in financial markets or there would be no opportunity to make money. The general rule of thumb is, the higher the risk, the greater the potential return. Professional asset managers will use the most sophisticated data, such as that provided by APT, in order to assess and manage their investment risk.
Paul Samuelson – The first American to win the Nobel Memorial Prize in Economic Sciences
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
Some people think of investing as a type of gambling and, whilst there is an element of risk to both, there are greater differences. A savvy investor will have a long-term plan, study all of the available data, and diversify the risk of their portfolio. This may not sound very exciting but sensible planning and research are both essential in achieving investment success. Professional asset managers will use market risk analysis software to enable them to allocate the right assets to their portfolios.
Peter Lynch – Successful businessman and stock investor
“Know what you own, and know why you own it.”
Make sure you do your homework before selecting assets to make up your portfolio. It is also important to review your investments on a regular basis as markets constantly fluctuate – what was once a sound investment may not always be so. It is important to optimise your portfolio regularly to make sure your asset investments still meet your goals.
Benjamin Franklin – One of the Founding Fathers of the United States
“An investment in knowledge pays the best interest”
When it comes to investing, nothing will give greater returns than educating yourself. Although this quote is hundreds of years old, it still holds true today. Of course the search for knowledge is also an investment in itself – one of the most important investments anyone can make.