15 Words of Wisdom on Finding an Edge

Written by

Jae Jun

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Listen to advice and accept instruction, that you may gain wisdom in the future. – Proverbs 19:20

One thing I would like to add is that not all advice is good advice, so it’s vital to filter out the noise from the facts. One of the easiest ways is to follow, listen and learn from people who have or are walking the successful path.

Finding an edge is something that we all want.

Investing is a zero sum game so when you are buying, there is a person on the other end who is selling.

How do you know that you’re correct?

By listening to wise counsel.

The path forward is never clear, but with the advice and guidance by value investing greats, it makes is easier to march forward.

Take these words of wisdom on finding an edge from people considered masters in value investing.

(Courtesy of Value Investor Insight)

Human beings are subject to wild swings in their levels of fear, risk tolerance and greed. That won’t change. I base my whole approach on buying when others are fearful and selling when others are greedy. The reason Shakespeare is so relevant still today is that his plays were all about human nature, and human nature never changes.

– Mark Sellers

Investors overreact to the latest news, which has always been the case, but I think it’s especially true today with the Internet. Information spreads so quickly that decisions get made without particularly deep knowledge about the companies involved. People also overemphasize dramatic events, often without checking the facts. It’s the classic, “Are more people killed each year by sharks or by being trampled by pigs?” type of situation – the dramatic event can get more play than it deserves. These types of overreactions are what we’re trying to take advantage of.

– John Dorfman

One way of dealing with information being more available is to stop playing the game and seek out securities or asset classes where there’s less information or competition.

– Seth Klarman

Wall Street’s view is that if you don’t make your projections, you’re a bad person. That’s because they don’t want to do the hard work of making their own projections to see if the company’s projections make sense.

– Richard Pzena

Wall Street sometimes gets confused between risk and uncertainty, and you can profit handsomely from that confusion. The low-risk, high-uncertainty [situation] gives us our most sought after coin-toss odds. Heads, I win; tails, I don’t lose much!

– Mohnish Pabrai

Lack of visibility on timing is one of the best things you can have as an investor with a long time horizon. We love situations where it’s very difficult to model this year’s earnings.

– Ken Shubin Stein

I have a ready answer when people ask me why I’m such a long-term investor, which is because I failed miserably as a short-term investor. I’m not against making money in the short term, I just don’t know how to do it.

– Thomas Gayner

Julian Robertson was always adamant about seeking out the opposite point of view and then being completely honest with yourself in deciding whether your analysis overrides that. That’s something we try to practice every day.

– Robert Williamson

One of the first questions we ask about a possible investment is “Why is it mispriced?” If you don’t have a reason, there’s a good chance it isn’t really mispriced.

– Jeffrey Tannenbaum

Pilots do the same thing thousands and thousands of times in their lives, but they still go through the physical pre-flight checklist to eliminate what could be a catastrophic error if they try to circumvent it. Investors are well served by having similar types of checklists and sticking with them.

– James Montier

Before we continue with the great quotes, please click on the image below to get the best investment checklist that will make investing a little bit easier for you.

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We try to fight against statements like “this would be a great investment if it were 10% cheaper.” That’s a wussy conclusion because you can’t be wrong: If it goes down, you can say you knew it was too expensive. If it goes up, you can say you knew it was a great investment. But if you know it’s a great investment you should buy it.

– Christopher Davis

Becoming a better investor has always struck me as a process of self-education – you read everything you can and learn through trial and error. My finance degree, except for having to take some accounting courses, was worthless.

– Aaron Edelheit

If you stop learning, the world rushes right by you. It’s very hard to do this by merely hearing someone else talk. That’s why most teaching is vivid. For example, when they trained soldiers for World War II, they shot real bullets above them, which really taught them to hug the ground.

– Charlie Munger

As Graham, Dodd and Buffett have all said, you should always remember that you don’t have to swing at every pitch. You can wait for opportunities that fit your criteria and if you don’t find them, patiently wait. Deciding not to panic is still a decision.

– Seth Klarman

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