Long-term investing is both an exciting and challenging journey and many see value investing as one of the best strategies to invest successfully on the stock market. In this article, we are going to see 9 excellent value investing quotes that teach timeless principles for successful investing.
The idea behind value investing is to take advantage of the differences between the price and value of stocks. If done properly, this strategy delivers great results and it’s no surprise that a large number of successful investors are indeed value investors.
We have a lot of good examples from leading investors and reading principles like the one contained in the following value investing quotes are a great way to gain more knowledge and improve our investments.
9 Excellent Value Investing Quotes
Let’s start with the first valuable value investing quote:
“Price is what you pay; value is what you get.”Benjamin Graham
This is one of the most famous quotes on value investing and includes the main message that makes value investing possible, that is: price and value are not the same thing!
The value of a stock depends on the business, while the stock price depends only on the equilibrium between supply and demand in the market, that could result into a price that has nothing to do with the underlying reality of the business, both up and down. This should always be kept in mind when investing and it’s a very useful piece of advice.
“You can’t predict, [but] you can prepare.”Howard Marks
Howard Marks is an investor and founder of Oaktree Capital Management, he provides a lot of insightful ideas and points of view in his memos and this quote is about the underlying uncertainty that we, as investors, all face when we step into the market.
Investing is risky and a lot of things are just completely unforeseeable, like the coronavirus crisis before it turned into a global pandemic. Still, smart investors should have been prepared for some crises because they occur over and over again.
“To be a better investor, you have to stand on your own. You just can’t copy other people’s insights.”Li Lu
This is maybe the most interesting quote here. When modeling what works, consciously or unconsciously we have a tendency to look for a shortcut or somebody that did the work for us.
Internet today makes this even easier and sneaky because we are exposed to all sorts of opinions and ideas.
Every great investor worked on his valuation framework, developed his own specific investment strategy, and found his way to invest. Are you bombarded with investment ideas, or have you developed your own investment strategy?
“The secret to investing is to figure out the value of something – and then pay a lot less”Joel Greenblatt
Although there is no single estimate of what a stock should be worth, real value investors always come up with a reasonable estimate of the intrinsic value of the company to be compared with the market price.
That’s the basis of value investing and what allows to find the situations of asymmetric risk-reward and provide one of the most important and valuable things when it comes to value investing: a margin of safety.
“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.”Warren Buffett
Discipline is one of the traits of every successful investor. It can happen that for long periods of time the market deviates from what you expect or specific company events suddenly occur.
Furthermore, if you are a value investor, most of the time you are a contrarian and you act in a different way compared to what the majority of people are doing.
The ability to stay disciplined and commit to your investment process will make all the difference over time.
“All intelligent investing is value investing – acquiring more that you are paying for. You must value the business in order to value the stock.”Charlie Munger
Acquiring more than what you are paying for sounds a lot like common sense and that should be something to look for when investing. In certain situations, the market presents great opportunities to do just that, buying undervalued companies getting more than what you are paying for.
The key to knowing if something is overvalued or undervalued is to study and understand the business and come up to what’s a fair estimate of its intrinsic value.
“We simply attempt to be fearful when others are greedy and greedy only when others are fearful.”Warren Buffett
This quote perfectly follows the one before, because stock prices are the opinion of the market on a particular stock in a certain moment in time.
Efficient or not efficient, it’s a fact that financial markets can change opinion in a very short period of time, and those are the toughest times for investors’ emotions. When markets are fearful, it’s usually one of the best times so get in.
“The fact that people will be full of greed, fear, or folly is predictable. The sequence is not predictable.”Warren Buffett
When you invest in financial markets, be prepared! Because even if we all know that there are certain dynamics, the truth is that “anything can happen”. It’s always a good idea to have a portfolio that matches your risk tolerance and be sure that you don’t risk money that you need within a short period of time.
“If you don’t understand a company, if you can’t explain it to a 10-year-old in 2 minutes or less, don’t own it.”Peter Lynch
This is one of my favorite quotes on investing. It sounds easy and logical but the truth is that a lot of people that call themselves investors have literally no idea of why they are holding what they are holding.
The funny thing, pointed out by Peter Lynch himself during an interview, is that when buying a new refrigerator people research more than before buying stocks. Knowing the business, understanding the company and what can happen with the business is vital to be a successful long-term investor.
Taking some time to think about the principles contained in these value investing quotes can make a real difference when it comes to plan and put in practice an effective investment strategy for the long-term.
Value investing surely works, but it requires to do a thorough analysis on the companies that you want to buy and a strong discipline to act and keep going when the market disagrees with you.
You don’t necessarily need to become Warren Buffett in order to have good returns, but learning more about value investing is likely to give you a large number of advantages that other investors simply can’t have.