Quotes on Behavior

People make changes in their lives and their portfolios because they are confident they are making a change for the better. Without that confidence, they would merely sit still.

Any market will gain respectability if it goes up high enough and any market will lose respectability if it goes down enough.

Investing isn't about beating others at the game, it's about controlling yourself at your own game.

The biggest problem that people have isn't selecting the right money managers. It's the way they change managers all the time in response to fluctuations of short-term performance.

For most investors in general, selling the expensive asset, and buying the cheap asset, seems like a logical strategy -- except when you actually try to do it. Because most people are actually not wired to be selling what's expensive and going up, and buying what's cheap and going down.

Inflection points occur in the market, and around them performance can suffer, but you have to stick to your guns.

The mantra is patience, patience and more patience. Think long-term and remember that the big rewards accrue with compound annual rates of return.

The achievements of natural science stand as convincing testimony to man’s ability to use reason. Unfortunately, these achievements do not ensure that human behavior is always governed by reason.

One could say that my whole career in Wall Street proved one long process of education in human nature.

The world is not driven by greed. It’s driven by envy.

There has always been a considerable number of pathetic dopes who busy themselves examining the last thousand numbers which have appeared on a roulette wheel, in search of such a repeating pattern. Sadly enough, they have usually found it.

People would rather believe that they have been robbed than that they have been fools on the advice of fools.

Although expectations of the future are supposed to be the driving force in the capital markets, those expectations are almost totally dominated by memories of the past. Ideas, once accepted, die hard.

The underlying driving force behind market timing decisions seems to be emotional -- fear, greed, chasing performance -- buying something after it has gone up, disappointment, and sales after something has declined.

With a casual attempt to beat the market, you're going to fail.

You have to really understand the businesses that you’re buying through the medium of stocks. And unless you’re willing to put a lot into that, you shouldn’t expect to get much out of it.

Wall Street tends to overreact when it gets worried about earnings.

When people are looking for performance they sharpen their pencils and find reasons to buy.

Never, never pay attention to what the market is doing.

Consistency and patience are crucial. Most investors are their own worst enemies. Endurance enables compounding.

The very best investors are the ones who invest according to their own psyche. You find that their investment styles are consistent with their personalities, their intellects, their approaches to work. It’s not somebody else’s style; it’s their own, and it’s deeply ingrained.

Humility is an enormously important quality. You can’t win without it. Survival in the end is where the winners are by definition, and survival begins with humility.

There is a considerable tendency for common stock investors to do the greater part of their buying, both of "good" and "bad" securities, at high levels of the market. They are equally inclined to do the greater part of their selling at low levels of the market, a procedure which is not conducive to successful results.

I think I am safe in asserting that the margin trader, speculator, gambler, or whatever you choose to designate the average man who goes to Wall Street after easy money, does not lose money when he sells. He loses it when he buys!

The human animal never behaves as wisely as he means to, particularly when his counselor is Hope or Fear.

Periods of depression invariably follow periods of overoptimism, when fear replaces hope as the controlling emotion.

You can't imagine how many shrewd, experienced business men forget in Wall Street what it took them years to learn.

Anything that helps make addicts out of occasional traders should be avoided as if it were the bubonic plague.

The stock speculator, as a rule, is beaten by himself!

In the history of every great catastrophe, you will find that some masterly bit of stupidity sets fire to the oil-soaked rags.

Wall Street in boom days is an aggregation of madmen. The Stock Exchange becomes Bedlam well dressed.

In the beginning of a stock market boom it is ever the "dear public," the fleecy lambs, the most guileless victims, who make the most money. They really do not know when to stop winning, and so in the end they lose profit and principal.

Greed is a bandage which a higher power sometimes binds across the eyes of reason.

In the stock market, facts are important, but emphasis is all important.

A lot of smart people think they’re way smarter than they are, and therefore they do worse than dumb people. And it’s very common to be utterly brilliant and think you’re way the hell smarter than you are.

When investors -- individual and institutional alike -- engage in far more trading --inevitably with one another -- than is necessary for market efficiency and ample liquidity, they become, collectively, their own worst enemies.

For social and sentimental reasons, people have a propensity to want to do really dumb things from time to time.

I think you have to be an undying optimist, and perhaps a Pollyanna to enjoy and to be successful at managing common stock portfolios over a long period of time.

One thing all of us know for sure is that the stock market doesn't go down just because a lot of folks think that it has entered the heart of looney land.

To beat the market is not easy. In addition to a good investment manager, the investor needs perspective, patience, and courage -- qualities that do not abound in today’s intensely competitive world.

Nothing so gives the illusion of intelligence as personal association with large sums of money.

It's natural for people to think their own civilization and their own nation is better than everybody else, but everybody can't be better than everybody else.

People, it turns out, are not that averse to risk. For many reasons, they are not opposed to risk, but they are opposed to losing and the possibility of loss plays a very significant part in their decision.

When deciding to sell, people have control over whether to give themselves pleasure or give themselves pain, and they tend to give themselves pleasure. In other words, they tend to sell winners and hang on to losers. It turns out to be a bad idea.

It turns out that when people have to sell a stock from their portfolio, they are not rational between winners and losers. People tend to sell winners and hang on to their losers. The psychology of that is quite straightforward.

One of the major differences between behavioral economics and standard economics is that, in standard economics, the individual agent is supposed to be driven or motivated by the utility of future wealth and discounted future wealth and present wealth. In behavioral economics, agents are supposed to be motivated by something else: gains and losses.

Confidence is not a very good indicator of accuracy.

Individual investors tend to churn their accounts, they tend to trade too much, and that they trade too much seems to be due to over-confidence. They believe they know something that they do not know and this is one essential characteristic of human beings, which makes them different from rational beings.

Hoaxes, frauds, manias, and other large-scale financial irrationalities have been with us from the beginnings of the markets in the seventeenth century, long before the Internet.

Almost everybody on this planet has the brain power to make money in the stock market. The question is whether you have the stomach for it and whether you're willing to do a little bit of work? Those are the key elements.

Most people on Wall Street don't have principles to begin with. And if they have them, they don't stick to them.

We are sort of the polar opposites of a lot of investors. We do a lot of thinking and not a lot of acting. A lot of investors do a lot of acting, and not a lot of thinking.

Good investing requires a weird combination of patience and aggression. And not many people have it.

The single most important thing, if you want to avoid a lot of stupid errors, is knowing where you’re competent and where you aren’t. Knowing the edge of your own competency. And that’s very hard to do because the human mind naturally tries to make you think you’re way smarter than you are.

The only sound distinction in investment policies for one type of investor or another is based not on his financial position but on his financial competence and financial preparation.

Please do not forget that as the common stock level advances, the advantages of common stocks appear to be more attractive and the basic need for owning them becomes more persuasive in everybody’s reasoning. Yet in fact, common stocks undoubtedly become riskier as the price advances, and thus the risk increases as the widespread acceptance of common stock develops.

It may be a fair generalization to assert that the top levels of most "normal" bull markets are characterized by a tendency to equate stock risks with bond risks.

The history of markets is one of overreaction in both directions.

Deregulation only works when everybody is virtuous and flexible.

Neither regulation nor memory is a perfect protection against the will to delude one's self or others. If people are sufficiently persuaded of their own wizardry or that of others, they and their money will be separated.

Many things are possible in Wall Street. But neither there nor anywhere else has a man ever prospered by trying to hog it.

In Wall Street, what has happened before will happen again. It must, as you will admit if you stop to think about it.

Laws have been passed to outlaw some of the more egregious behavior which contributed to the big bull market of the twenties. Nothing has been done about the seminal lunacy which possesses people who see a chance of becoming rich.

I do strongly urge that we be as cautious as ever in reposing too great confidence in men of great financial position.

When people think there's easy money available, they're not inclined to change.

There is nothing at all conservative, in my opinion, about speculating as to just how high a multiplier a greedy and capricious public will put on earnings.

A public opinion poll is no substitute for thought.

I have observed many cases of habit patterns in all activities of life, particularly business, continuing (and becoming accentuated as years pass) long after they ceased making sense.

We live in an investment world, populated not by those who must be logically persuaded to believe, but by the hopeful, credulous and greedy, grasping for an excuse to believe.

I have always found it easier to evaluate weights dictated by fundamentals than votes dictated by psychology.

The road to successful investing is paved with independence of spirit, decisiveness, and the courage of one's convictions.

I'm an optimist, both as a person and an investor. It's a big mistake to be pessimistic as long as we have a viable civilization which is reasonably well managed.

It makes no sense for individual investors to jump in and out of the market. People who trade in that way rarely die rich, whereas the patient investor often does.

I have a very simple strategy. I buy good companies at attractive prices. Then I sit on them.

I've been involved in the market too long to get excited.

The big profits I have made were through very long planning, waiting and watching.

You want to be greedy when others are fearful. You want to be fearful when others are greedy. It's that simple.

The fact that people will be full of greed, fear, or folly is predictable. The sequence is not predictable.

The business schools reward complex behavior more than simple behavior, but simple behavior is more effective.

You need a temperament that neither derives great pleasure from being with the crowd or against the crowd because this is not a business where you take polls, it's a business where you think.

The tour we've taken through the last century proves that market irrationality of an extreme kind periodically erupts -- and compellingly suggests that investors wanting to do well had better learn how to deal with the next outbreak.

If you quantify, you won't necessarily rise to brilliance, but neither will you sink to craziness.

Don't think for a moment that small investors are the only ones guilty of too much attention to the rear-view mirror.

People are habitually guided by the rear-view mirror and, for the most part, by the vistas immediately behind them.

There seems to be some perverse human characteristic that likes to make easy things difficult.

When the price of a stock can be influenced by a "herd" on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical.

When proper temperament joins with proper intellectual framework, then you get rational behavior.

When people are desperately trying to sell, I buy. When people are desperately trying to buy, I sell. It has worked out very well over the years.

Any time you offer a big prize for a small amount of money, you encourage stupid behavior on behalf of those you're appealing to.

We try to get fearful when others are greedy. We try to get greedy when others are fearful. We try to avoid any kind of imitation of other people's behavior.

The best kind of business to be in is something where you sell something that costs a penny and sells for a dollar and is habit forming.

The stock doesn't know you own it.

The disadvantage of being in any kind of a market type environment - Wall Street would be the extreme - is that you get over-stimulated. You think you have to do something every day.

Our expectations of the future are not unbiased and do not reflect all available information.

Your wealth is in many ways dependent on what other people will pay for your assets.

Job insecurity has been a problem for as long as people have depended on a paycheck.

In speaking of future prospects it is often difficult to make the distinction clear between what one considers the most desirable in the public interest and what one reckons to be the most probable in the actual circumstances. For unfortunately the course of events which is the most desirable is not always the most probable!

Buy only what you understand, believe in, and intend to stick with -- even when others are chasing the next miracle.

I don't want to spend my time trying to earn a lot of little profits. I want very, very big profits that I'm ready to wait for.

It is just appalling the nerve strain people put themselves under trying to buy something today and sell it tomorrow. It's a small-win proposition. If you are a truly long-range investor, of which I am practically a vanishing breed, the profits are so tremendously greater.

I know plenty of guys who consider themselves to be long-term investors but who are still perfectly happy to trade in and out and back into their favorite stocks.

You want to design a portfolio that will make the members of a household as happy as possible, but the problem is that people aren't very good at anticipating how they're going to react to various market outcomes.

When the markets are fairly ebullient, investors tend to hold the least objectionable securities rather than the truly significant bargains.

Human nature being what it is, small loopholes are likely to be exploited until they become big ones, and big ones until they turn into financial disasters.

If the stock market has a period of outperformance of its long-term return, it is inevitably followed by some period of underperformance. But people being optimistic and greedy by nature take the recent short-term outperformance of stocks as a sign of good things to come, rather than a warning of bad things to come.

People always want to believe that this time is different, that there’s something new under the sun, and that through their own ingenuity they can wish away risk.

People who chase growth, who chase highfliers, inevitably lose because they paid a premium price. They lose to the people who have more patience and more discipline.

It turns out that value investing is something that is in your blood. There are people who just don’t have the patience and discipline to do it, and there are people who do. So it leads me to think it’s genetic.

One of the nice things about investing is there are many different disciplines that work. You should find one that you’re comfortable with.

Your own psychology can be your worst enemy as an investor.

Managers do not create large alphas by being conventional. They do so by taking the risk of being wrong and alone.

Market inefficiencies, like tax selling and window dressing, also create mindless selling, as can the deletion of a stock from an index. These causes of mispricing are deep-rooted in human behavior and market structure, unlikely to be extinguished anytime soon.

The daily blips of the market are, in fact, noise -- noise that is very difficult for most investors to tune out.

The tendency of investors to follow the market's momentum and bet on whatever has worked recently is accompanied by antipathy to whatever hasn't.

Being extremely early is tantamount to being wrong, so contrarians are well advised to develop an understanding of the psychology of the sellers.

We consider for each of our investments not only whether a security is undervalued but why it is undervalued. If the reason is that there are uninformed or emotional sellers, we become more comfortable.

It is always easiest to run with the herd; at times, it can take a deep reservoir of courage and conviction to stand apart from it. Yet distancing yourself from the crowd is an essential component of long-term investment success.

It is not really within human nature to comprehend that you may not know everything you think you know, and, further, that what you believe in could change on a dime.

People do not consciously choose to invest according to their emotions -- they simply cannot help it.

There is no salve for the hungry investor like the immediate positive reinforcement that comes from making money instantaneously.

There is always a tension in the financial markets between greed and fear.

Everybody can talk about the problems, but very few investors act on them.

When the next fear-inspired panic occurs, investors' finger-pointing will almost certainly be aimed outward, while a good part of the blame should instead be directed inward.

People seeking answers to why the market plunged usually emphasize the immediate events that precipitated a selling panic, when in fact these events are but minor symptoms of much more severe underlying problems.

I like the idea of having a little action. That may not be good from a logical point of view, but it's good from an emotional point of view.

If you don't like to lose money and it affects your judgment, don't buy things that can go down a great deal.

One of the things you learn in this business is humility because you see your mistakes the next day.

The market at this point is institutional and we all act like a herd.

If you looked at September 1986 to October '87, the market was unchanged. It had a thousand points up and a thousand points down and they only remember the down.

We naturally fear the unknown, and the future is always unknown.

No matter how calm you are, no matter how long term an investor you are, no matter what your horizons, when the market is jumping around, you feel uncertainty in your gut and it's hard to resist that.

Volatility gets you in the gut. There's no question that when prices are jumping around, you feel different from when they're stable.

The times I have been most wrong are the times I thought I was most right.

The main thing that experience taught me was a sense of humility and an awareness of the importance of surprise, that is, unexpected things happen.

The most important lesson an investor can learn is to be dispassionate when confronted by unexpected and unfavorable outcomes.

Unless you are that rarest of birds, someone who is cool under the rapid-fire, high-pressure decision making required to maximize your returns, let others take such risks, and allow your portfolio to plug along at a slower speed. In investing, tortoises tend to win far more often than hares over the turns of the market cycle.

Few decisions in life motivated by greed ever have happy outcomes.

Volatility provokes the constant dread that some investors know more than we do, making us fearful of ignoring such powerful price movements.

Many people pride themselves on being "long-term investors," but acting deliberately when prices are bouncing around is not so easy.

Markets are shaped by what I call "memory banks." Experience shapes memory; memory shapes our view of the future.

Faith in the long run is the most powerful force that drives investment decisions.

In the end, the value of your portfolio is not what somebody tells you is likely to happen over the long run but how much other investors out there are going to be willing to pay you for your assets.

What other people are doing in the market is not relevant to what you’re doing.

Investing for the long run works only as long as people don't believe it.

When inflation is low, you feel that you know more about the future, and are much more willing to take risks.

Gold, much more so than any other commodity, is about sentiment and psychology.

As long as people are willing to pay foolish prices for things, no plan is foolproof.

Corrections are unpredictable. By selling stocks to avoid pain, you can miss the next gain.

There's no such thing as a worry-free investment. The trick is to separate the valid worries from the idle worries, and then check the worries against the facts.

There's a psychological benefit to tossing the bums out: The names disappear from the monthly brokerage statements; we're no longer reminded of our mistakes.

It's in the nature of Wall Street to imagine that whenever a company sets a record for earnings, it will go on setting new ones.

With every company, there is something to worry about, but the question is, which worries are valid and which are not?

The best time to get involved with cyclicals is when the economy is at its weakest, earnings are at their lowest, and public sentiment is at its bleakest.

The very existence of doubt creates the conditions for a big gain in the stock once the fears are put to rest. The trick is to put your fears to rest by doing the research and checking the facts -- before the competition does.

If you own stocks, there's always something to worry about. You can't get away from it.

The real problem is not finding a good fund manager, it's finding the right time horizon for your investing and what your temperament is for volatility.

The man in the street associates the acquisition of wealth with rising markets; failures, ruin, depression, panics with falling markets.

The average trader is naturally a chronic bull. It is human nature to prefer optimism to pessimism.

Fashions play their part in the stock market as in other affairs of life.

After a stock market decline, people may perceive more risk than before when, in fact, the decline may have taken some of the risk out of the market.

There is no clear evidence from experience that the investment policy which is socially advantageous coincides with that which is most profitable.

Day-to-day fluctuations in the profits of existing investments, which are obviously of an ephemeral and non-significant character, tend to have an altogether excessive, and even an absurd, influence on the market.

I never in all my life bought a stock because I liked it. I bought it because it was a cheaper bargain than any similar stock I would buy anywhere in the rest of the world.

As a rule, Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.

The malady of commercial crisis is not, in essence, a matter of the purse but of the mind.

It's important to recognize that the riskiness of investing comes only partly from the things you invest in. A lot of the risk comes from the behavior of the participants.

Almost any asset can be risky or safe, depending on how other investors treat it.

I believe the market accurately reflects not the truth, which is what the efficient market hypothesis says, but it accurately and efficiently reflects everybody's opinion as to what's true.

When things go badly, people become cautious. Then their caution causes things to go well, and when things go well, they become incautious. I think that's a forever cycle.

Potentially profitable, nonconsensus forecasts are very hard to believe in and act on for the simple reason that they are so far from conventional wisdom.

Expertise is great, but it has a bad side effect. It tends to create an inability to accept new ideas.

Crooks, crazies, egomaniacs, people full of resentment, people full of self-pity, people who feel like victims, there's a lot of things that aren't going to work for you. Figure out what they are and then avoid them like the plague.

Most financial principles and theories have a degree of good sense to them. It may be a large degree, but it never comes close to being absolute.

People do not care for the idea that any important activity which affects them is as beyond their control as a pair of dancing dice.

It becomes more and more evident that stock prices are not alone determined by high or low credit, earnings or carloadings. There is another mighty factor which cannot be charted along with the various business indices. It is how high or how low are the hearts of men and women during the given period.

Those with enterprise haven't the money, and those with money haven't the enterprise, to buy stocks when they are cheap.

Economist picture a thousand buyers and sellers congregating in the market place to match their keen wits and finally evolve the correct price for each commodity. In the securities market particularly, the word of the ticker is accepted as law, so that one often thinks of prices as determining values, instead of vice-versa.

The market may be crazy, but that doesn't make you a psychiatrist.

The chief hazard of a careful common stock program is not that it may bring unexpected losses, but that its profits will turn the investor into a speculator greedy for quicker and bigger gains -- and therefore headed for ultimate disaster.

Investors venerate their old gods long after their divinity is departed.

I think this business of greed -- the excessive hopes and fears and so on -- will be with us as long as there will be people.

It is a safe prediction for me to make that, in future years as in the past, common stocks will advance too far and decline too far, and that investors, like speculators -- and institutions, like individuals -- will have their periods of enchantment and disenchantment with equities.

Probably the largest aggregate losses are suffered by people who invest overenthusiastically in a basically sound company.

Speculators often prosper through ignorance.

A large advance in the stock market is basically a sign for caution and not a reason for confidence.

Investors feelings and reactions regarding inflation are probably more the result of the stock market action that they have recently experienced than the cause of it.

Most people sell stocks at low prices not because they have to but because they are scared.

It is interesting to see how unpopular companies can become, merely because their immediate prospects are clouded in the speculative mind.

Bull markets and bear markets last long enough so that the average trader is likely to forget by the time the climax is approaching that any sort of movement is possible.

It takes a great deal of nerve to cling to a short position in a stock in the face of an advancing market even though the stock may clearly be overvalued.

You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready. You won't do well in the markets. If you go to Minnesota in January, you should know it's gonna be cold. You don't panic when the thermometer falls below zero.

There is evidence that the stock market is more efficient in processing information about what other investors are doing than it is in processing fundamental information about the underlying assets, which is why stock prices so often turn out with hindsight to have been crazy rather than rational.

At some point, we will have a major correction and everybody will get scared again, and we will have another buying opportunity.

When you have a family, and a house, and the market is going down, and you're on margin, it's probably too much pressure for you to do the right research and the right kind of thinking to make good decisions.

It’s not as simple as having timid people and bold people. Some people will be risk averse in one circumstance and not so averse in another. It’s oversimplifying human nature to think we can put people into those two categories as the only psychological measure we use.

The problem with the markets is that they are just like people, and individual investors can easily get confused.

People are guided largely by intuition, and it’s sometimes shocking the way they think.

The market's very emotional but over time, doing something logical and systematic does work. The market eventually gets it right.

The psychological mood of people changes more drastically than anything else in finance. Human nature changes least of all.

To some degree, it is the consequence of the very instability of investors' thinking -- the very variation in investor confidence -- which leads them to view the picture through rosy glasses one year and through dark glasses the next year.

If you totally divorce economics from psychology, you've gone a long way toward divorcing it from reality.

Beating the market averages, after paying substantial costs and fees, is an against-the-odds game; yet a few people can do it, particularly those who view it as a game full of craziness with an occasional mispriced something or other.

Perhaps the most important rule in management is "Get the incentives right."

The whole trick in life is to get so that your own brain doesn't mislead you.

If you’re going to be in this game for the long pull, which is the way to do it, you better be able to handle a 50% decline without fussing too much about it.

If you're capable of being reasonable, it's a moral failure to be unreasonable when you have a capacity to be reasonable.

Gambling is a tax on ignorance. People often gamble because they think they can win, they're lucky, they have hunches, that sort of thing, whereas in fact, they're going to be remorselessly ground down over time.

Shortsighted things that people sometimes do for their individual self-interest don't tend to work out well in the long run.

There is no great secret in fortune making. All you have to do is to buy cheap and sell dear, act with thrift and shrewdness and then be persistent.

Herding is not necessarily something one does as the result of analysis. It is what one does when one's confidence is impaired.

I don't say people are irrational. I speak of reasonableness.

Never underestimate the man who overestimates himself. These weird guys who overestimate themselves occasionally knock it right out of the park.

It's absolute cockamamie crazy to sell stocks after they drop. Instead, you should say, "Today there's a first-rate bargain and I'm buying."

If you go to the stock market because you want excitement, then sooner or later you will lose.

Be skeptical of the popular reasoning behind any spectacular move in the stock market -- but don't be too sure this reasoning is wrong.

We must remember that delusions swing between extremes, like pendulums. Delusions of grandeur and unending wealth give place to delusions of unending gloom. One is as unreal as the other.

Whether stocks rise or fall is determined by innumerable forces and elements, by economic conditions, the actions of governments, the state of international affairs, the emotions of people -- even the vagaries of the weather.

People invest in stocks for two opposite reasons -- in hope and confidence in the future of an enterprise or in fear that the value of their capital will be lost through inflation.

The stock market registers the judgments of multitudes of buyers and sellers about the many factors which affect business -- what business is like today; what it will be like in the future.

The impression has built up that the stock market is the cause of booms and busts. Actually, it is the thermometer -- not the fever.

Allied to the general pattern of market movements is the general pattern of speculative thinking.

If the relative stability of general business and corporate profits produces an unlimited enthusiasm and demand for common stocks, then it must eventually produce instability in stock prices.

My experience leads me to predict that the action of the market will govern the investor's choice as to probable future growth rates, rather than vice-versa.

The market cycle will once more prove to be the human-nature cycle; its economic background will have changed, but not its basic character nor the consequences of its character.

Good common stocks are investment media which are subject to speculative influences. The speculative influences are not in the common stocks; they are in the minds of the people who buy and sell them.

It is very hard to think against the crowd, especially when the crowd is practically universal and unanimous in thought and emotion.