Lessons Learned From History’s Greatest Investors

Our topic on this episode of the Ready for Retirement podcast is about the lessons learned from history’s greatest investors.

Questions answered: What do all great investors do? What are the most important lessons / stories throughout history surrounding investing? What strategies can I implement to improve my financial future? What is the best approach for my individual situation? 

Are you ready to start focusing on the things that truly matter when it comes to your financial future?

Key Points

• Recent Headlines
  • As investors, headlines are what we see and what concerns us, but it shouldn’t. 
    • Journalists’ job is to get clicks and they know they will get more clicks by driving fear into investors.
    • A Journalist’s job has an obligation to get people to read their article so their publication can sell advertisements and remain in business.
    • They are not focused on your retirement goals.
    • Remember the only way to fully protect yourself in the short-term is to get out of the stock market, although that may be the riskiest thing you can do over the long-term.
  • In the book, Thinking Fast & Slow, Amos Tversky & Daniel Kahnemann talk about “What You See Is All There Is”.
    • As investors, we see headlines dropping and all of these fearful things, but that is not all there is.
    • How do we filter through the noise so we can reach our goals?
• Greatest Lessons 
  • Benjamin Graham
    • Warren Buffett credits Benjamin Graham for writing the best book on investing.
    • Benjamin is the author of “The Intelligent Investor”.
      • Benjamin believes it’s not all about how you invest, but believes the priority is structuring a financial plan to ensure you have a strategy to reach your financial goals. 
      • Benjamin says “The investors chief problem and worst enemy is likely to be themselves”. 
    • Daniel Kahnemann discusses the heuristics we have and those we are blind to.
      • We think we are making rational decisions, but they’re so often built on our emotions or subconscious programming. 
• Charlie Munger
  • Charlie is Warren Buffet’s partner at Berkshire Hathaway.
    • Charlie says, “Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred gratification gene, you got to work very hard to overcome that”. 
    • Example: You can either choose $1,000,000 today or you can receive 1 penny that doubles everyday for a month, what would you choose?
      • Most people choose the first option.
      • The penny doubling is worth almost $5,400,000. 
      • The principle idea remains the same, if you give something time, you will have success.
    • Charlie believes it is all about patience, choosing the right investments and giving them time to work.
• Warren Buffett
  • Warren believes “a market downturn doesn’t bother us, it’s an opportunity to increase ownership with great management at great prices”. 
    • He attempts to reframe your thinking to view downturns as an opportunity rather than as a fearful time. 
    • Can you view downturns as an opportunity rather than solely enduring it? 
• Jack Bogle
  • “I don’t even know anybody who knows anybody who can successfully predict the stock market and its ups and downs”.
    • Jack revolutionized the financial services industry by bringing low-cost index funds to the retail investor.
• Peter Lynch
  • “Far more money has been lost by investors trying to predict the corrections, than in the corrections itself”.
    • Peter Lynch is regarded as one of the greatest investors of all time.
    • People lose money because they attempt to time the market.
      • What happens next?
      • The stock market continues to rise and investors don’t go back in because prices are now too high for them to feel comfortable about entering the market.
      • Everyday an individual doesn’t invest, they’re missing out on the wealth that could have been created.
    • Oftentimes individuals get lucky; they time the market and they get in at a great price at a great time.
      • What often happens is individuals think they know the market better than everyone else and so they continue to attempt to time the market and miss out on some of the best days of the stock market as they wait on the sidelines in cash. 
    • The best you can do as an investor is have proper perspective.
• Christopher Davis
  • “A 10% decline in the market is fairly normal, it happens about once a year. Investors who realize this are less likely to sell in a panic and more likely to remain invested benefiting in the wealth building power of stocks”.
    • Perspective is everything. If you invest because you expect it only to rise, you’re setting it up for failure.
    • If you understand every year your portfolio will be down and have a temporary decline, you’re setting yourself up for success.
  • It’s about recognizing the stock market will fluctuate in the short-term, but over the long-term you are positioned to reach your goals.
• Nick Murray
  • “If you think the market is too high, wait until you see it 20 years from now”. 
    • One of the common hesitations people have around investing is that the market is too high. 
      • The reason we invest is because the market continues to hit all-time highs.
      • When you think about the market being too high and it seems a correction will happen, it will. 
      • But will the market advance another 20% or 100% before that next downturn.
      • Nobody has any idea where the market will be in 6 months, 12 months, 24 months, etc.
  • “No matter how much money you have, if you’re still worried, you aren’t wealthy”.
    • This is the most powerful quote, in my opinion.
    • Financial planning has nothing to do with how rich we are, but how wealthy we are.
      • Wealthy is about the fulfillment of what your values are.
      • You could be the richest person in the world, but if you’re only rich in terms of financials, you’re not wealthy.
      • It’s not about dying with the most amount of money, but using your finances to do what it is you want to do with your life.
    • The hardest part about investing is the distractions, the headlines, the noise and pollution we see in the media.
• Financial Planning
  • It all starts with a financial plan and an understanding that a strategy is all you need to reach your goals. 

Timestamps

1:44 – Introduction

2:15 – Financial Journalists

5:07 – The Distraction of Headlines

7:40 – Behavioral Finance 

9:44 – Power of Compounding Interest

12:11 – The Opportunity of Market Downturns

14:18 – Revolutionaries in Finance

16:50 – Market Timing

18:32 – Investing Stories

20:58 – Rich vs. Wealthy

21:12 – Aligning Your Investments With Your Financial Goals

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