In a previous post from September, we covered some famous adages and sayings from the world of personal finance. In this post, we go over other adages and sayings, but this time from the world of investing.
- “Sell in May and Go Away” – Suggests selling stocks in May and returning in November based on historical trends. While this may not always be true, it does make investing simpler and more automated, for those who want to free up their summer for fun and traveling.
- “The Trend is Your Friend” – Advises following the market trend rather than predicting reversals. Trends are useful for simplifying the world around us, but they may not always be true and accurate.
- “Buy Low, Sell High” – Suggests buying assets when prices are low and selling them when high. Sounds simple enough, but of course applying it is a different story and more complicated.
- “Don’t Put All Your Eggs in One Basket” – Emphasizes diversification to reduce risk. To put it in real terms, if you have $25K invested in the market, it is better to spread it across different sectors and asset classes than to keep it concentrated in one asset or sector only. Historical research and evidence show that this strategy not only reduces losses but also helps smooth returns over time, as gains in some investments may offset losses in others.
- “Time in the Market Beats Timing the Market” – Advocates for long-term investment over market timing. To try and predict the perfect entry based on price is a futile practice. Instead, just get in and put time on your side. This way, you are taking advantage of the power of time compounding.
- “Past Performance Is No Guarantee of Future Results” – Reminder that historical performance does not guarantee future outcomes. Even if a stock has delivered 10% average result every year for the last 10 years, doesn’t mean it will do so for the coming year.
- “Buy and Hold” – Advocates for long-term investment without frequent trading. In other words, don’t get too high when market goes up, nor do you have to feel low when market goes down. You are in it for the long term, and that is when the real growth happens.
- “Cut Your Losses and Let Your Profits Run” – This strategy advises selling underperforming investments quickly to prevent further losses, while allowing successful, profitable investments to continue growing. By cutting losses early, you free up capital that can be reinvested elsewhere, potentially in more promising opportunities. At the same time, letting your profitable investments run capital.
- “Cash Is King” – Emphasizing the importance of having liquid assets available. While having cash sitting there may not give you any real returns, it is often good to have for any future needs, whether it is for emergency or to be ready when a good buying opportunity presents itself.
- “Invest for the Long Term” – Encourages focusing on long-term goals rather than short-term fluctuations. As mentioned earlier, unless you are in it for day trading, investment is for the long term, so patience is needed.
- “Bulls Make Money, Bears Make Money, Pigs Get Slaughtered” – Suggests both bullish and bearish market approaches can be profitable, but greed leads to losses. Be careful with your investing animal, as some may cost you a lot more than others. And don’t forget, it is sometimes OK to be a bull when everyone else is hibernating like a bear and vice versa.
- “Don’t Fight the Fed” – Advises aligning strategies with central bank policies. By understanding and moving with the direction of the Federal Reserve’s policies—such as interest rate changes and quantitative easing—you can align your investments to benefit from broader economic shifts rather than working against them. Of course, for those in Canada, the Federal Reserve equivalence would be the “Bank of Canada”
- “Never Invest Money You Can’t Afford to Lose” – Emphasizes investing only funds that won’t impact your financial situation if lost. This is even more critical if you are in your 50s and 60s and approaching retirement.
- “You Can’t Time the Market” – Suggests that predicting market highs and lows is often ineffective and borderline impossible for the majority, save for those who get lucky. Similar to our earlier point about “Time in the Market Beats Timing the Market” , instead of timing the market and waiting for that perfect discounted price, try to get in and have time on your side.
- “Know What You Own and Why You Own It” – Originally attributed to legendary investor Peter Lynch, the idea is to encourage understanding your investments thoroughly. In other words, if you don’t understand the industry, company or trend, don’t invest in it just because others are. While not being familiar with a certain investment doesn’t translate into losses, it just makes things more complicated in the long term, and the opposite is true for investments that you are familiar with. Which takes us to the next and last adage…
- “Invest in What You Know” – Advises investing in familiar sectors or companies with known understanding. Even better and I will take this further: invest in what you like and already buy and use. For example, if you use Rogers for your cable and internet, why not invest in them? Similarly with your gas bill, if you live in Canada and get your gas through Enbridge, why not invest in them and in turn get some of your money coming back to you.
These timeless investment adages serve as guiding principles, offering simple yet profound advice for
navigating the complexities of financial markets. Each saying offers a unique perspective, but together, they emphasize the importance of discipline, patience, and an informed approach to investing. Integrating these principles into your own strategy might not guarantee success, but they provide a solid foundation for making smarter, more resilient financial decisions. Remember, investing is a journey, and the best strategies are those aligned with your financial goals, risk tolerance, and market understanding.