Financial Adages to Remember

Last week we took a look at the legitimacy of “Sell in May and go Away” and I really enjoyed writing and researching that article. I had an itch to look up some more and thought it would be fun to rapid fire through them, so here we go.

The Trend is Your Friend

This is encouraging you to invest with the general market direction like go long in a bull market and short in a bear market. I sure wish I knew when a bear market was going to occur so I’ll stick with the next best thing and stay long while increasing as much as I can in a down market.

It is commonly attributed to American investor and financial analyst Martin Zweig. The full phrase before Martin shortened it was “The trend is your friend, ‘til the end when it bends”

Don’t try and catch a falling knife

I could not find a true source of origin for that saying but some attribute it to Mark Twain and others to the Futures Market. It essentially is a warning against buying a stock in free fall as it may keep dropping. Wish I stuck to this back when I had my position in AQN

Markets can remain irrational longer than you can remain solvent

Attributed to John Maynard Keynes who was a British Economist simply emphasizes the danger of betting against the market, even if you believe it is logically the correct move.

This makes me think back to the movie the big short where Michael Burry is trying to bet against the housing market and it keeps going up and up. His investors try to pull out and he has to block them otherwise he will end up losing everything.

This saying is probably not relevant to you and I as we should be investing for long term growth

It’s not what you earn, it’s what you keep

This one is a favourite of mine and can be said in many different ways like avoid life style inflation, don’t keep up with the Joneses and/or pay yourself first. The general idea here is that even if you make 1 million dollars a year if you then spend it all you are effectively poor.

Buy low, sell high

I’d argue this is the most well known saying that we will talk about today. The issue here is that nobody can time the market successfully time and time again. I feel like that is even more true these days with the crazy swings that we see all of the time.

However I think if you turn this on its head and say buy more when the etf / stock drops and hold for a long time then you should effectively be buying low and selling high… it will just be after a very long period of time.

Time in the market beats timing the market

Kind of a cheat code to achieving the previous adage. If you consistently buy and hold for a long time you will likely do better than trying to buy low and sell high over the same time span. However buy holding you will effectively do many buy lows followed by man sell highs years or decades into the future 😉

Be fearful when others are greedy, and greedy when others are fearful

Famously stated by Warren Buffet, and I’m sure I must have mentioned this on the blog before as well. It essentially encourages contrarian investing; opportunities often come when sentiment is low. I tend to stick to the latter half of this one byh trying to buy a little more when there is fear. I generally do not sell as I am saving for retirement (since we already have a mortgage)

Cut your losses short and let your winners run.

Idea here is simple if you’ve been holding onto a bad stock for a long time and nothing material has changed it may be time to accept the losses and transfer the money elsewhere.

Summary

That’s a quick run-through of some of the most well-known investing adages—and a few personal thoughts along the way. Some are cautionary, some are motivational, but all of them carry lessons that still hold up today. How many of these did you already know, and do you follow any of them in your own investing journey?

That’s all folks thanks for reading!

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