Following from our recent article on must-know financial and investing phrases, we have 20 more popular phrases in the world of investing and personal finance. Know and master these if you want to elevate your level of wealth and reach financial freedom faster. To some, these may just words or beautiful quotes. To the financially wise, they are powerful and convey a strong meaning and purpose.
“Cut Your Losses”
Refers to the act of selling an investment that has declined in value to prevent further losses. Unfortunately, some will double down and not only not cut their losses, but try to buy more at a lower price in order to average down their cost basis, hoping for a rebound. While this can work, it also risks throwing good money after bad. Smart investors know when to cut losses and reallocate to better opportunities, protecting their portfolio from further damage.
“The Market Never Sleeps”
Emphasizes that financial markets are constantly moving and that opportunities and risks can arise at any time. This is even more relevant in today’s 24 hour bitcoin and cryptocurrency trading availability.
“Compound Interest is the Eighth Wonder of the World”
Highlights the power of compound interest to grow investments over time through reinvested earnings. Over the years, we have written extensively about this concept and its crucial role in building wealth and increasing income and net worth.
“Your Net Worth is Your Self-Worth”
Suggests that a person’s financial health reflects their overall success and stability. Elevate one, and chances are, the other will follow, or at least in theory. The idea is that the more you boost your net worth, the more reflection that becomes of your lifestyle and doing things right, which eventually reflects about how you feel about yourself.
“The Best Time to Plant a Tree Was 20 Years Ago. The Second Best Time is Now”
Encourages taking action on investments or savings immediately, even if you missed earlier opportunities. Doesn’t matter if you are 45 or 55, and while it is always better to start from an earlier age, it is still good to start the moment you decide to. Even if you are approaching retirement. While starting late may make you regret not starting earlier, it magically makes you more desperate and you end up working hard and saving a lot more money than you normally would. In other words, the less time you have to retirement, the harder you will work at saving more money.
“Don’t Fight the Fed”
Advises investors to align their strategies with the direction of monetary policy set by the U.S Federal Reserve, Bank of Canada or various other central banks. Interest rate changes, quantitative easing, and other policy decisions can significantly impact markets, affecting asset prices, borrowing costs, and overall economic conditions. Investors who stay informed and adapt their strategies accordingly can better navigate market cycles and capitalize on opportunities.
“Cash is King”
Emphasizes the importance of having liquid assets available for opportunities and emergencies. While this may also refer to real cash in the bank, it doesn’t necessarily mean actual cash as in bills, although some may have some of that saved too, in case they ever need it.
“Fortune Favors the Bold”
Suggests that taking calculated risks in investments can lead to significant rewards. The key emphasis is on calculated—planning your risks rather than taking them blindly. For example, investing in a penny stock based on a friend’s advice is blind risk-taking. In contrast, investing in a promising tech startup that is gaining traction and media attention is a more calculated risk.
“It’s Not About Timing the Market, It’s About Time in the Market”
Reinforces that long-term investing usually outperforms attempts to time the market. I’ve been guilty of this myself—waiting months for a stock or ETF to hit a specific price, only for it to never reach that target, costing me potential gains in capital growth and dividends.
“Don’t Let Your Emotions Drive Your Investments”
Advises investors to base decisions on logic and analysis rather than emotions. While emotions may play a role, they should be minimal. Loving a company doesn’t mean its stock is a good investment, and disliking a company shouldn’t stop you from investing if it’s strong, profitable, and widely successful. Let logic, not emotions, guide your choices.
“A Rising Tide Lifts All Boats”
Indicates that when the market is doing well, most investments will benefit from the overall positive trend. The important lesson here is to be in the market in the first place, so you can take advantage of such tides, even if it may also mean that waves will take the market down at times.
“Buy the Rumor, Sell the News”
Suggests buying assets based on market speculation and selling when the actual news or events are announced. This strategy is rooted in the idea that markets often price in expectations ahead of time, causing a surge in demand before an anticipated event. However, when the news becomes official, the excitement fades, leading to a sell-off as traders take profits.
“The Stock Market is Filled with Individuals Who Know the Price of Everything, But the Value of Nothing”
Critiques investors who focus solely on market price without understanding the underlying value of assets. It is easy to look at a stock and think it is a hot one and time to get into the euphoria, and equally as easy to look at a stock that is on the slide and think you got a bargain, when in fact there is more to it than just the price.
“No Pain, No Gain”
Implies that making significant gains in investments often requires enduring risks or losses. While you may get lucky once in a while with a hot stock, in reality, patience and time is needed to see results in the market, including compounding.
“You Make Your Money When You Buy, Not When You Sell”
Highlights that the success of an investment depends on buying at the right price, not just selling at a high price. While both are important, the entry point is more crucial, since it factors in both price and timing in the market.
“Past Performance is No Guarantee of Future Results”
A reminder that just because an investment performed well in the past doesn’t mean it will continue to do so. And vice versa, although not as cited as it is for upward moving stocks. The point is, while historic pricing and data is a good guide, it doesn’t mean or guarantee anything for how the stock, industry or market as a whole will move in the future. Tread with caution.
“When in Doubt, Zoom Out”
Advises investors to look at the broader picture and long-term trends rather than focusing on short-term fluctuations. I actually love this and literally use it on an almost daily basis when looking at a specific stock. If I see a sudden spike and big price change, I zoom out to see how the stock has been doing in the last 3, 6 and 12 months, if not beyond, to get a better picture. In fact if you are into crypto and Bitcoin, this applies there too, given the latter’s short term massive fluctuations.
“Bear Markets are When the Strongest Companies Separate Themselves”
Suggests that challenging market conditions reveal the true strength and resilience of well-managed companies. It is no coincidence that a lot of the big and popular brands we know today were born during difficult economic times, including the great depression, the period after world war II, the Dotcom bubble, the 2008 recession, or most recently with the Covid19 pandemic. The lesson is simple: look for companies that withstand the harsh conditions and come out even stronger.
“Buy the Dip”
Recommends purchasing assets during market downturns to take advantage of lower prices and potential future gains. Warren Buffet‘s famous quotes come to mind here: to be fearful when others are greedy and greedy when others are fearful. During big market downturns and corrections, do you start panicking and thinking of selling to preserve your base and avoid further losses? or do you see it as an opportunity to buy stocks at massive discounts? I actually used the first few weeks of the Covid19 pandemics to load up on large cap dividend-paying stocks, that had gone down an average of 30% to 50%.
“Don’t Put All Your Eggs in One Basket”
Advocates for diversification to spread risk and avoid significant losses from a single investment. This means that you should spread your money and investment amongst different assets, sectors and markets. This essentially means that your portfolio is so spread around, that if one sector or market is down, the other will make up for it. It is the equivalent of being in different places at the same time, so if it is raining and cold by the mountain, you don’t care much because it is warm and sunny by the beach. Diversification is unavoidable if you want to be on the winning side of your investments.
In the world of investing and personal finance, mastering key terms and adages can significantly boost your financial literacy and accelerate wealth-building. Phrases like “Cut Your Losses,” “The Market Never Sleeps,” and “Compound Interest is the Eighth Wonder of the World” emphasize the importance of strategic decision-making, timing, and long-term growth. Concepts such as “Don’t Fight the Fed” and “Buy the Dip” advise aligning your investments with market trends and taking advantage of downturns. Meanwhile, principles like “Cash is King,” “Fortune Favors the Bold,” and “Don’t Put All Your Eggs in One Basket” highlight the value of liquidity, calculated risk-taking, and diversification. Understanding these terms and applying them in your financial journey can help you navigate market cycles, minimize risks, and unlock the potential for sustained growth. There is a reason they are cited in the media and in public, and have been so for decades: they are proven to stand the test of time and help simplify investing.