A Quote by Michael Steinhardt
Time and again, in every market cycle I have witnessed, the extremes of emotion always appear, even among experienced investors. When the world wants to buy only [bonds], you can almost close your eyes and [buy] stocks.
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Just as outright euphoria is often a sign of a market top, fear is for sure a sign of a market bottom. Time and time again, in every market cycle I have witnessed, the extremes of emotion always appear, even among experienced investors. When the world wants to buy only treasury bills, you can almost close your eys and get long stocks.
Investors... can't pick stocks that are better than average. Stocks are a good thing to own over time. There's only two things you can do wrong: You can buy the wrong ones, and you can buy or sell them at the wrong time. And the truth is you never need to sell them.
In an ideal world, the intelligent investor would hold stocks only when they are cheap and sell them when they become overpriced, then duck into the bunker of bonds and cash until stocks again become cheap enough to buy.
I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low P/E, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time.
The word passive does a disservice to investors considering their options. Indexing provides an effective means of owning the market and allows investors to participate in the returns of a basket of stocks. The basket of stocks changes over time as stocks are added or removed based on its rules.
Successful investors like stocks better when they’re going down. When you go to a department store or a supermarket, you like to buy merchandise on sale, but it doesn’t work that way in the stock market. In the stock market, people panic when stocks are going down, so they like them less when they should like them more. When prices go down, you shouldn’t panic, but it’s hard to control your emotions when you’re overextended, when you see your net worth drop in half and you worry that you won’t have enough money to pay for your kids’ college.
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.
Every time there's a dip in the market, we buy. If you don't buy the land right, it ain't going to work.
Near the top of the market, investors are extraordinarily optimistic because they've seen mostly higher prices for a year or two. The sell-offs witnessed during that span were usually brief. Even when they were severe, the market bounced back quickly and always rose to loftier levels. At the top, optimism is king, speculation is running wild, stocks carry high price/earnings ratios, and liquidity has evaporated. A small rise in interest rates can easily be the catalyst for triggering a bear market at that point.
You can buy a man's time; you can buy his physical presence at a given place; you can even buy a measured number of his skilled muscular motions per hour. But you cannot buy enthusiasm... you cannot buy loyalty... you cannot buy the devotion of hearts, mind or souls. You must earn these.
In my opinion, the greatest misconception about the market is the idea that if you buy and hold stocks for long periods of time, you'll always make money. Let me give you some specific examples. Anyone who bought the stock market at any time between the 1896 low and the 1932 low would have lost money. In other words, there's a 36 year period in which a buy-and-hold strategy would have lost money. As a more modern example, anyone who bought the market at any time between the 1962 low and the 1974 low would have lost money.
Investors have been too willing to buy stocks with strong reported earnings, even if they do not understand how the earnings are produced.
As a bull market continues, almost anything you buy goes up. It makes you feel that investing in stocks is a very easy and safe and that you're a financial genius.
So the first thing I learned about how to get superior performance is not to buy stocks that are near their lows, but to buy stocks that are coming out of broad bases and beginning to make new highs.
For all your long-term investments, such as retirement accounts that you won't touch for at least ten years, you need a mix of stocks and bonds. Stocks offer the best shot at inflation-beating gains. But stocks don't always go up. That's where bonds come into play: They have less upside potential, but they also do not pack the same risk.
I think the first word of caution is; It's not the kind of market where you need to jump in immediately on these downs. We've trained investors so much over the past decade and a half: Buy the dip, buy the dip.
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