Quotes to invest by
Words of wisdom for a bear market
Based on the April 24, 2020 Investments Unplugged podcast featuring Philip Petursson, Kevin Headland, and Macan Nia from Manulife Investment Management’s Capital Markets Strategy team — a conversation about well-loved quotes that can help to guide investment strategy
Words have a powerful ability to impact our thoughts and feelings, the decisions that we make, and the actions that we take. And certain well-expressed phrases can offer hope, reassurance, and motivation, especially during times of economic turbulence.
“Words can impact us in a number of different ways,” says Philip Petursson, Manulife Investment Management’s Chief Investment Strategist. It can be through a book that we’ve read, a song lyric, or a movie quote — something that triggers us in a way to think about things differently. I remember things told to me by my grandfather and my father — quotes that have shaped my investing philosophy, and touchpoints that continue to keep me grounded and on track.”
For Senior Investment Strategist Macan Nia, words of wisdom from his grandfather also serve as an important guidepost:
Imagine a straight line. Above the line is probably not as good as you think, and below the line probably isn’t as bad.
When considering market performance, Macan says he connects with this phrase — a reminder that things are probably not as bad as we think they are. “This is a philosophy that I live by that can also apply to investing — taking profits when things are going well and reallocating those profits when things seem less positive.”
“It’s along the same lines as ‘This too shall pass,’” says Philip. “If you think something is as good as it’s going to get, then there’s the chance that it’s going to get worse. And if you think a situation is going to be bad, the outcome tends to be better than anticipated.”
“Another similar saying is ‘No price is too low for a bear or too high for a bull,’” says Senior Investment Strategist Kevin Headland. “When markets are down, there’s the fear that it’s going to get so much worse. And when things are going well, it’s only going to become even more fantastic.”
Kevin adds that this doesn’t just apply to the markets — it’s often the case in our personal lives. When something bad happens, it’s easy to think it’s the worst thing that will ever happen, or the flipside and something positive might be the best thing that will ever happen. “It’s important to remain humble and understand that you can always learn from the upside or downside, but ultimately things may not be either as bad or as good as they seem.”
Keep it simple
Philip recalls a guiding principle handed down by his grandfather, who was an engineer. “He would say, ‘Too many parts equal too many defects.’ I think this relates to portfolio construction where I’m just trying to build a portfolio that will weather various market cycles. I don’t believe in esoteric investment strategies. I bring it down to the basics — stocks, bonds, and if you really want to get exotic, then gold. That would be it. When you complicate things, when we try to come up with the best, new ideas for investing, they tend to fail.”
Heavyweight champ Mike Tyson may have been known more for his moves in the boxing ring than the investment arena, but Kevin keeps this quote top of mind when things sound too good to be true:
Everyone has a plan till they get punched in the mouth!
— Mike Tyson
“Things tend to work until they don’t,” says Kevin. “When things are going well, these new esoteric products give you really great returns. But then things may not work as well as you first thought, causing harm to your portfolio that may be hard to recover from. Back to basics, steady Eddie, buying stock from good companies, rebalancing, taking advantage of good opportunities — that’s the way you win over time.”
Stay focused on your goals
Billionaire oil magnate Thomas Boone Pickens had a way with words, with one phrase in particular that resonates with Kevin:
The older I get, the more I see a straight path of where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.
— T. Boone Pickens
In other words, stay focused on your long-term investment plan. “Veering slightly can be okay, but make sure you stay on the path,” says Kevin. “What’s your long-term goal? Do you have time to weather the storm? Refocus on your goal.”
“Along the same lines, there’s this saying: ‘Don’t change lanes,’” says Philip. “Just stay on target, stay on course and try not to deviate.”
Golden nuggets
While known more for his theory of relativity than investment advice, these wise words from Albert Einstein ring true for Macan, especially during times of volatility:
In the middle of every difficulty lies opportunity.
— Albert Einstein
During a market downturn, there’s opportunity. “I like to call these ‘golden nuggets of investment opportunities,’ and we get these golden investment nuggets once every decade,” says Macan. “These nuggets appear during times of volatility, but it can be hard to pull the trigger because your emotions get the better of you. Investment returns tend to be best when you feel sick to your stomach pulling the trigger.”
During times of market volatility, separating your emotions from investment decisions can be difficult to do, but it’s an important fundamental to follow.
“It’s very difficult given the human element surrounding the coronavirus, and it’s unfortunate what has happened, but now there’s opportunity,” says Kevin. “In bad times there are opportunities, and it’s a good time to take advantage of that right now.”
“I think it’s important to bet on mankind,” says Macan. “You have the world-leading pharmaceutical companies putting all of their resources and manpower behind developing a vaccine and therapies. By investing today, you’re setting yourself up for the next decade.”
Focus on the fundamentals
Investments Unplugged podcast listeners may recall Philip’s sage advice on “Why hope is not an investment strategy” and to stick with sound investment fundamentals. Science fiction may seem like a stretch when it comes to investment fundamentals, but that’s where you’ll discover one of his favourite quotes:
Do not try and bend the spoon, that’s impossible. Instead, only try to realize the truth. … There is no spoon. … Then you’ll see that it is not the spoon that bends, it is only yourself.
— Rowan Witt (as Spoon Boy), The Matrix
For Philip, this quote relates directly to the concept of trying to time the markets. “You absolutely can’t time the markets. If you try, you’re going to fail. Once you realize you can’t time the markets, then you realize that all you have to do is invest in good quality fundamentals. The fundamentals will guide you to the truth.”
From The Matrix to the Oracle of Omaha, Warren Buffett’s words of wisdom ring true for Kevin.
The stock market is a device to transfer money from the impatient to the patient.
— Warren Buffett
“If you stay invested for the long term, eventually things get better and you ride it out,” says Kevin. “Make small changes but be patient. Stay in the market because it’s time in the markets, not timing the markets.”
“I think that’s a source of a lot of frustration from investors today and why so many want the market to rebound so quickly — because we don’t have patience,” says Philip. “Bear markets don’t recover in a year, they take years to recover. And that doesn’t mean you can’t make money. You can absolutely make money by rebalancing your portfolio and taking advantage of price dislocations, but we do need to be patient.”
For Kevin, the importance of patience during bear markets brings up another key quote:
Markets take the elevator down and the stairs up.
— Anonymous
“Bull markets fall fast, and this was the fastest bear market in history, where we lost 20 per cent in just one week,” says Kevin. “It’s going to take time for the markets to recover. They just don’t snap back up as fast as they fall.”
Value of advice
During times of difficulty comes the opportunity to stand above the crowd. A favourite quote for Macan is from the world of sports. While it may not be investment related, it speaks to the importance of dedication:
There may be people that have more talent than you, but there’s no excuse for anyone to work harder than you do.
— Derek Jeter
“I think a lot of us feel vulnerable because there isn’t anything we can control when it comes to COVID-19. All we can control is how hard we’re working,” says Macan. “From our team’s perspective, from an advisor’s perspective, working hard means getting in front of your clients during these times of stress and helping them to stay calm. Those clients will remember who was there for them during the stressful times at the bottom.”
“Being present and working harder will help advisors to grow both their business and credibility,” says Kevin. “It’s important to make sure that you are there when people need you the most.”
We all need someone to talk to, and I think this is where an advisor adds a lot of value,” says Philip. “Has your robo-advisor called you today? Probably not.”
Fear is normal
This next favourite quote from Philip dates back a few decades to the 1983 Dan Akroyd/Eddie Murphy comedy, Trading Places, where fear is not an option:
Think big, think positive, never show any sign of weakness. Always go for the throat. Buy low, sell high. Fear? That’s the other guy’s problem.
— Dan Aykroyd (as Louis Winthorpe III), Trading Places
“Having a sense of fear in this environment is completely normal,” says Philip. “We’ve never been in this situation before, so to have some fear is normal. What we want to avoid though: don’t let that fear become panic. Panic is when we make mistakes.”
Along the same line is this quote:
Investing is like soap. The more you touch it, the smaller it gets.
— Anonymous
Don’t allow fear to drive your investment decisions. Ride it out; don’t touch it.
And this brings us to a final favourite quote from Kevin Headland — a quote from his father’s home office bulletin board.
Tough times never last, but tough people do.
— Robert H. Schuller
“This was a quote that helped my dad get through his own personal situation of unemployment,” says Kevin. “We’re in a tough moment. Investors see their accounts have fallen and they’ve lost money. But it will recover. It takes time, but the tough times don’t last. If you stay focused, you’ll make it through this.”
In summary, these quotes can help to offer a guiding philosophy — not only about investing, but about life.
“Stop focusing on the things you can’t control,” says Philip. “What we can control is our attention to the fundamentals, our asset allocation, our goals and objectives, and staying the course.”
Philip Petursson, CIM
Chief Investment Strategist and Head of Capital Markets Research
Kevin Headland, CIM
Senior Investment Strategist
Macan Nia, CFA
Senior Investment Strategist
Important disclosure
A rise in interest rates typically causes bond prices to fall. The longer the average maturity of the bonds held by a fund, the more sensitive a fund is likely to be to interest-rate changes. The yield earned by a fund will vary with changes in interest rates.
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