Understand your own psychology

To be a successful investor you need to understand your own psychology, if losing money makes you miserable, you should use a very conservative pattern of saving and investment.

- Charles Munger

As Munger says, for any investor to be successful, he should first know his tolerance level. Investors of mutual funds and stocks may have already experienced some sort of volatility. But the same investors who tend to think they have the capacity to tolerate the volatility start to panic once they see their portfolio in red 50% more.

Few cycles of investment volatility will help them overcome this fear factor, but it is the responsibility of their advisors to guide and hand hold these clients when the extremes occur in the markets. The investors would not face this situation if they have gone through risk profiling to understand their tolerance levels.

In my experience, I have seen properly guided investors won't tend to panic and trust the advisors guidance and understand the short term nature of market movements.

The same rule is applicable to non-individual investors like corporates as well.

Portfolio

Owning stocks is like having children - don't get involved with more than you can handle.

- Peter Lynch

If you expect to be a net saver ...

If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.

- Warren Buffett

The best stock to buy

The best stock to buy may be the one you already own.

- Peter Lynch

Futile near term predictions

Attempting to outperform the market in the short-run is futile since near-term stock and bond price fluctuations are random and because an extraordinary amount of energy and talent is already being applied to that objective. The effort only distracts the money manager from finding and acting on sound long-term opportunities.

- Seth Klarman

Using mediocre opportunities you don't reach the heights

It takes character to sit there with all that cash and do nothing. I didn't get to where I am by going after mediocre opportunities.

- Charles Munger

Franklin on empty sack

It is hard for an empty sack to stand upright.

- Benjamin Franklin