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Created on 29.10.2018
Learn how to invest with the very best tips from renowned investors
Even if you can’t invest millions like Warren Buffett, Benjamin Graham or Carl Icahn, these renowned investors do still offer good tips on how smaller investors can also make more out of their money. We will take quotations from five of the most successful investors in the world to show you the best ways of investing your money.
Warren Buffett
Warren Buffett is a true investment heavyweight. He makes his money with the shares he has acquired in over 80 companies, including IBM, Coca-Cola, Duracell and Procter & Gamble. In just over 50 years, Buffett expanded the former textile company Berkshire Hathaway into a holding company, and increased the company’s value by an average of around 20% each year. This cemented Buffett’s reputation as the most famous investor of all times – and his estimated fortune of USD 75.6 billion.
Someone’s sitting in the shade today because someone planted a tree a long time ago.
What the quotation means: if you invest in the long term, you will reap the profit later on. Much like a tree, investments need time to grow and develop. Have an investment horizon in mind that is as broad as possible, and don’t panic if your investments don’t perform the way you would like them to in the short term. Generally speaking, a long-term investment strategy will prove the most profitable. Find out more at “Why long-term investments are important”.
John Templeton
Sir John Marks Templeton was a British businessman and fund manager. He began systematically purchasing inexpensive shares in 104 different companies when he was only 27. Many of these companies were on the brink of bankruptcy – but a large number quickly managed to get back in the black. With the profits he made from these investments, Templeton set up his own investment company, which he then sold for USD 440 million in 1992.
The only investors who shouldn’t diversify are those who are right 100% of the time.
What the quotation means: Diversification is the foundation of a successful business strategy, as this quotation and the early years of Sir Templeton’s career show. If you invest your money in several different companies, regions and industries, you minimize risk and increase your chances of a return – this applies to small- and large-scale investors in equal measure. Find out more about diversification in the article “Diversification explained”.
Carl Icahn
Carl Icahn is an American large-scale investor. His strategy is geared towards acquiring controlling shares in interesting companies and playing an active role in shaping their business. This is how he invested in companies such as eBay, Apple and Yahoo. The fictional speculator Gordon Gekko in the film “Wall Street” is said to be based on Icahn and his tough management style. He has an estimated fortune of USD 16.7 billion.
When most investors, including the pros, all agree on something, they’re usually wrong.
What the quotation means: Icahn is describing what’s known as the bandwagon effect, a common stock market phenomenon. If it seems everyone agrees that a share or an industry will yield big profits, then everyone will invest – hiking up the prices and reducing potential profit as a result. This is why it’s a good idea even for small investors not to follow every investment tip blindly, but to make select investments. Find out more about the bandwagon effect and other psychological pitfalls for investors in the article “Psychological pitfalls to avoid when investing”.
Benjamin Graham
Practically nobody has shaped the world of finance quite like Benjamin Graham. The American economist and investor defined fundamental factors in security analysis such as dividend, liquidity and book value, and introduced them into stock market analysis. According to Warren Buffett, his book “The Intelligent Investor” is “the best book on investing ever written”, and is now one of the standard works for investors.
The essence of investment management is the management of risks, not the management of returns.
What the quotation means: if you are investing money, you should first make sure you are aware what risks you are willing to and can afford to run. You should then gear your investment strategy towards these two factors – known as your risk appetite and risk capacity – rather than focusing solely on making the biggest possible return. Good risk management can in fact also optimize return, or your risk-return profile. Find out more in the article “Investing money – how it works”.
André Kostolany
André Kostolany was an American stock market and financial expert. He was particularly renowned as a speculator. He went bankrupt more than once as a result of his speculative investments – but recovered each time. All in all, he made losses on 49% of his speculative investments, and made profit on 51% of them. This 2% difference enabled him to enjoy a more than comfortable standard of living.
If you want to eat well, you buy shares; if you want to sleep well, you buy bonds.
What the quotation means: Kostolany’s statement confirms Benjamin Graham’s quotation on risk – choose your investment instruments based on your risk appetite and risk capacity. Cautious and more daring investors alike can compile a portfolio of bonds and shares that matches their investment style. Find out more at “Why shares are worthwhile”.
