Peter Bernstein had a deep understanding of risk. He understood risk in a way that most people don’t consider — how it relates to time, behavior, diversification, longevity — in their investment decision-making process.
And risk wasn’t a bad thing either. To Bernstein, risk existed but it didn’t always materialize. In other words, losses aren’t inevitable but they are possible. It’s something to be protected against. But in so doing, that protection offered opportunities too.
Bernstein also had a way with words. His ability to sum up complex ideas into a short sentence or two was impressive. In the course of my reading, a number of his highly quotable lines have stood out. I thought I’d share a sample of it.
Here’s Bernstein:
In investing, tortoises tend to win far more often than hares over the turns of the market cycle. — Source
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Investing for the long run works only as long as people don’t believe it. — Source
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Faith in the long run is the most powerful force that drives investment decisions. — Source
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Prices change when events are different from what the market has expected them to be. — Source
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Volatility provokes the constant dread that some investors know more than we do, making us fearful of ignoring such powerful price movements. — Source
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Survival is the only road to riches. — Source
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Consequences, not probabilities, determine the decisions that matter. — Source
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The constant lesson of history is the dominant role played by surprise. Just when we are most comfortable with an environment and come to believe we finally understand it, the ground shifts under our feet. — Source
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The trick in risk management is in recognizing that normal is not a state of nature, but a state of transition and that trend is not destiny. — Source
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Managers do not create large alphas by being conventional. They do so by taking the risk of being wrong and alone. — Source
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While we can learn from the long run about how bonds and stocks respond to changing environments and to each other, the long run can tell us perilously little about what kinds of environments lie ahead. — Source
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Even the most serious efforts to make predictions can end up so far from the mark as to be more dangerous than useless. — Source
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I view diversification not only as a survival strategy but as an aggressive strategy, because the next windfall might come from a surprising place. — Source
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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. — Source
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The biggest risk is not knowing what you are doing. — Source
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The fact is that strategies that perform sub-optimally under certain market conditions can work surprisingly well in others. — Source
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Markets are shaped by what I call “memory banks.” Experience shapes memory; memory shapes our view of the future. — Source
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Being wrong on occasion is inescapable. — Source
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The times I have been most wrong are the times I thought I was most right. — Source
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The greatest risks are the risks that we don’t see and the most difficult problem is in preparing in advance for that kind of thing. — Source
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Survival as an investor over that famous long course depends from the very first on recognition that we do not know what is going to happen. We can speculate or calculate or estimate, but we can never be certain. — Source
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The only time you’re really diversified is when you have assets you don’t want to own. — Source
Last Call
- Value Investing: A Deep Dive Into Performance – Morningstar
- Everything You Need to Know About Recessions – A Wealth of Common Sense
- The Virtuous Investor: Turn Your Weaknesses into Strengths – Klement on Investing
- What is Chasing You? – MicroCapClub
- Valuable Lessons from Tom Russo about Investing Abroad – Fortune Financial
- The sCAPEgoat – Of Dollars and Data
- The Riskiest Investment You Can Make Today? (video) – The Compound
- Emerging Market Stocks: Getting Comfortable with the Uncomfortable — GMO
- How to Be Patient in an Impatient World – M. Manson
- How to Use Occam’s Razor Without Getting Cut – Farnam Street
- Jeff Bezos’s Master Plan – The Atlantic
