Let Experts Impact Your Market Mindset

Although the US public equity marketshave existed for hundreds ofyears, more than 80% of today'sparticipants joined the party in thepast 2 decades. Meanwhile, long-term investmentwisdom—as opposed to the plethora ofpitches for hot stocks and short-term tradingsystems—is tough to come by. The heady marketsof the late 1990s will not be replayed.There is no way around the fact that the stock marketdoesn't normally grow 25% per year, or 20%, or even15%. The long-term average is 8% to 10%. The markethas consistently reverted back to this average growthafter periods of abnormal returns.

In trying to grasp these new world realities, we canlook to the insights of those who have successfully negotiatedmany decades of turbulent markets. A commonthread among these long-term market survivors is theirconviction and willingness to act despite obstacles. Thesefolks rarely move with the Wall Street herd. Instead, theyrelish their counterconventional thinking. Most importantly,they balance an ability to stick to coreinvestment principles with a capacity to analyzeand adapt to rapidly changing conditions.Although many qualify, the following investorsencapsulate these themes:

Fortune

Thoughts of Chairman Buffett

•Warren Buffett. Dubbed by as the"Oracle of Omaha,"Warren Buffett isrenowned for his down-home advice and thesubstantial performance of his company,Berkshire Hathaway. In 1998, author SiimonReynolds compiled some of Buffet's famousstatements in (HarperBusiness; 1998). Famous words fromBuffett include, "One piece of advice I got atColumbia from Ben Graham that I've neverforgotten: You're neither right nor wrongbecause other people agree with you. You'reright because your facts are right and yourreasoning is right."

Fortune

For decades, Buffett has stepped up to theplate while others have sat on the bench, andhis many at-bats have provided insight. "I willtell you the secret of getting rich on Wall Street.You try to be greedy when others are fearful,and you try to be very fearful when others aregreedy."Stated another way in a 1988 article: "You simply have to behave according to what isrational rather than what is fashionable."

Winning the Loser's

Game

•Charles Ellis. Author of a wonderful book on establishinginvestment priorities entitled (McGraw-Hill; 2002), Charlie Ellisadmonishes individual investors to "ignore thedance of stock prices, fascinating and seductiveas the activity may be. The secret to long-terminvestment success is benign neglect. Let compoundingwork for you."Ellis drives anotherpoint home: "Decisions that are driven by eithergreed or fear are usually wrong, usually late,and very unlikely to be reversed correctly?Thecrucial question is not simply whether long-term returnson common stocks would exceed returns on bonds orbills if the investor held on through many startling gyrationsof the market. The crucial question is whether theinvestor will, in fact, hold on."

One Up on Wall Street

•Peter Lynch. Former head of Fidelity Magellanfund, Peter Lynch is another investment expert to gaininsight from. In his book (Simon& Schuster; 2000), Lynch sets the story straight: "Beforeyou think about buying stocks, you ought tohave made some basic decisions?aboutwhether you are a short-or long-terminvestor and about how you will react tosudden, unexpected, and severe drops inprice. It's best to define your objectives andclarify your attitudes beforehand, because ifyou are undecided and lack conviction, thenyou are a potential market victim."

Although many more people are now investing in thestock market and the pace at which information is disseminatedhas stepped up dramatically, the market's keyemotions—greed and fear—have not changed, and thewisdom of these market masters will be as applicable inthe next century as it was in the last.

is a principal of Lowry Hill, a private

wealth management firm that serves the

investment and financial needs of more than 300

client families in 38 states. She welcomes questions

or comments at cclark@lowryhill.com

Carol M. Clark