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Emotions by Investment Master Class

Emotions are universal and there is no stopping the flow of seasons” Adam Smith, The Money Game

“There is one requirement that is absolute in money management, and you have already learned it with the first Irregular Rule: If you don’t know who you are, this is an expensive place to find out.  The requirement is emotional maturity.  In short, you have to be able to handle any situation without losing your cool, or letting your emotions takeover. You must operate without anxiety”  Adam Smith, The Money Game

“Those who seek to relate stock movements to the current statistics of business, or who ignore the strongly imaginative taint of stock operations, or who overlook the technical basis of advances and declines, must meet with disaster, because their judgement is based upon the humdrum of fact and figure in a game which is actually played in a third dimension of the emotions and a fourth dimension of dreams.”  Barnie Winkleman, 1932

“The investor’s chief problem – and even his worst enemy – is likely to be himself.” Ben Graham

“As investors, we need to come to grips with our emotional liabilities”  Barton Biggs

“An old and rather corny comedy line has it that the only part of an automobile that cannot be made foolproof by a safety device is the nut that holds the wheel. By much the same token, there are no safeguards that can protect the emotional investor from himself.” J Paul Getty

“Your personal strengths will help determine your success as an investor.  Before you begin studying companies for investment, study yourself”  Roy Neuberger

“Again let me say, the human side of every person is the greatest enemy of the average investor or speculator” Jessie Livermore

“Almost all the great investors I know are unemotional. Unemotionalism is one of the most important criteria for being a successful investor” Howard Marks

“The main obstacle lies in disentangling ourselves from our emotions” Bernard Baruch

“Very few, if any, of us are wholly rational, that capacity compromised by mental shortcuts and biases – many subconscious – that impede the faculty of reasoning through to purely logical conclusions.  If there is hope, it comes from knowing the enemy that lies within, so that, thus fortified, we can face the enemy without untrammelled by such emotions as greed or (later) fear” Frank Martin

“Time and time again, in every market cycle I have witnessed, the extremes of emotion always appear, even among experienced investors” Michael Steinhardt

“It is a human frailty which we all possess in some degree that becomes the investor’s and speculator’s greatest enemy and will eventually, if not safeguarded, bring about his downfall. It is a human trait to be hopeful and equally so be fearful, but when you inject hope and fear into the business of speculation, you are faced with a very formidable hazard, because you are apt to get the two confused and in reverse positions” Jessie Livermore

“Unsuccessful investors are dominated by emotion” Seth Klarman

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“We’re pretty unemotional when we invest” David Tepper

"In general, emotions should be left out of the investment process." Francois Rochon

“What makes the task of fact finding so difficult is that in the stock market the facts of any situation come to us through a curtain of human emotions” Bernard Baruch

“Individuals who cannot master their emotions are ill-suited to profit from the investment process.” Ben Graham

“In speculation our emotions are constantly setting traps for our reasoning powers” Bernard Baruch

“The emotional burden of trading is substantial; on any given day I could lose millions of dollars. If you personalise these losses, you can’t trade” Bruce Kovner

“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.” Howard Marks

Mood or investor psychology is as important to markets as is information” Leon Levy

“At one moment, the mood in one aspect of the market may be ebullient, while elsewhere it is morose; the entire market gets swept along by a tide of emotion. Intellectual measures often seen not to apply” Leon Levy

“Why should the market be any more perfect than the very human emotions and calculations that drive it” Leon Levy

"Investors assess information emotionally, creating price distortions that the astute and nimble can exploit" Ralph Wanger

"Healthy investor behaviour means being disciplined, patient and unemotional" Chris Davis

“If you’re emotional about investment you’re not going to do well”  Warren Buffett

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"Be a disciplined rational investor. Follow logic and analysis rather than sales pitches, whims or emotions" Ed Thorp

"Maintaining a steady state of mind, whether we are in good times or bad, is the key to successful long-term investing" Christopher Browne

"Whether times are good or bad, I would say that the emotional quotient is more important than the intelligence quotient" Francisco Garcia Parames

"Separate your analysis from your emotions. Especially during a difficult period, many investors become distraught, let their emotions dictate their investment decisions, and make decisions that are irrational and costly. By understanding your emotions and by understanding the nature of a difficult period, an investor can hope to organize and control his mind to think and act rationally. " Ed Wachenheim

"I cry when I watch the Olympics. I am part of the one percent of the people in the movie theatre crying.  So I'm an emotional person. But about investing, I'm not emotional. Emotion is a very bad thing to mix with investing" Bill Ackman

“Emotion lies dangerously close to the surface for most investors and can be particularly intense when market prices move dramatically in either direction”  Seth Klarman

“I believe that uncontrolled basic emotions are the true and deadly enemy of the speculator; that hope, fear, and greed are always present, sitting on the edge of the psyche, waiting on the sidelines, waiting to jump into the action, plow into the game.”  Jesse Livermore

"I try to stay as unemotional as possible when things go against me" Kevin Daly

"The important thing is to not get caught up in emotions -- knowing emotions exist but not getting caught up and being cold, hard and calculating on valuation -- that is the secret" Joel Greenblatt

"Over the years, I have learned to control my emotions, especially when the prices of some or all of our stocks are falling sharply" Ed Wachenheim

"You really have to ban emotion from your process" Chris Mittleman

"An important quality in my field is emotional stability" Warren Buffett

"Try not to let your emotions affect your judgement.  Fear and greed are probably the worst emotions to have in connection with the purchase and sale of stocks" Walter Schloss

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Emotional mitigation – you’re trying to find some way to mitigate the emotional dimension which is constantly driving people to make incorrect decisions.  Data that’s accumulating from behavioural finance substantiates the fact we are, by and large, horribly wired to be objective”   William Browne

"To be the person who steps onto the exchange floor in 1929 and says 'I buy', you have to be unemotional" Howard Marks

"Fear and greed, most notable among counterproductive emotions where money is the object of human desire, can and often do compromise the capacity for rational and orderly thought"  Frank Martin

"There are very few people who have really beaten the market for more than a decade - and I have had the good fortune of knowing a decent percentage of them.  My observation is that they all have an uncommon mental game - when things get tough and the chips are down, and most people stop doing what they are supposed to do because of greed or fear, this group manages to avoid the mental fog that plagues the majority"  Adam Weiss

"It is critical not to get caught up in the emotions of the market"  Marathon Asset Management

"Why do experienced investors continue to make behavioural errors?  Seth Klarman once said that "people don't consciously choose to invest with emotion - they simply can't help it". I agree.  That's what makes investing so difficult for most people"  Ed Wachenheim

"To master investing you need to master your emotions. You cannot get emotional in making investment decisions." Peter Lynch

"We will do our utmost to separate reason from emotion, relying on the former while striving to recognize the latter and hold it at bay"  Seth Klarman

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