Quotes Below Are From Four Pillars Of Investing by William Bernstein
Bernstein On Short-Term Vs. Long-Term Risk”There are really two kinds of risk: short term and long term. Short-term risk is the knot we get in our stomachs when our portfolios lose 20% or 40% in value over the course of a year or two. It is a fearsome thing.
”Strangely, human beings are not as emotionally disturbed by long-term risk as they are by short term risk.”
”Short term risk, occurring over periods of less than several years, is what we feel in our gut as we follow the market from day to day and month to month. It is what gives investors sleepless nights. More importantly, it is what causes investors to bail out of stocks after a bad run, usually at the bottom. And yet, in the long-term, it is of trivial importance. After all, if you can obtain high long-term returns, what does it matter if you have lost and regained 50% or 80% of your principal along the way?Bernstein About Earning High Returns
”If you want to earn high returns, be prepared to suffer grievous losses from time to time. And if you want perfect safety, resign yourself to low returns.
”…the best way to spot investment fraud is the promise of safety and high returns. If someone offers you this, turn 180 degrees and do not walk – run.
”High-risk societies – or crisis periods in stable societies – result in high investment returns – if those societies survive.A Forecast in 2002 Of The Credit Crisis in 2008
”The Glass-Steagall Act separated commercial and investment banking. This last statute has recently been repealed. Sooner or later, we will likely painfully relearn the reasons for its passage almost seven decades ago.Amateurs Vs. Professionals
”What separates the professional from the amateur are two things: First the knowledge that brutal bear markets are a fact of life and that there is no way to avoid their effects. And second, that when times get tough, the former stays the course; the latter abandons the blueprints, or, more often than not, has no blueprints at all.Pervasive Gloom Just As Absurd As Irrational Exuberance
”Just as markets periodically suffer bouts of mania and gross overvaluation, so too do they regularly become absurdly despondent. Just as investors must deal rationally with irrational exuberance, they must also be able to handle pervasive gloom.You can read papers and commentary by William Bernstein at the website Efficient Frontier.
