Wall St Wisdom

The eponymous 1987 movie “Wall Street” is full of investing pearls of wisdom. These gems are doled out to the fresh-faced Bud Fox by ruthless corporate raider Gordon Gecko and other seasoned players throughout the movie. While it was made in the 80’s much of the advice still holds true today.

Here, we unpack three quotes from the movie and explain why they are just as relevant more than 30 years after the movie was released.

Persistence

“You win a few, you lose a few but you keep on fighting.”

Pretty self-explanatory. This especially applies to new investors who, usually due to inexperience, lose when first venturing into investing. They then get put off, or “bullied out of the market”. It can also happen when the market has entered a downturn, crash, or even just a correction. The point is to learn from it, and to continue to invest and learn. Over time you will have fewer losses and become a better investor. Per the famous Peter Lynch quote, “the way to make money in stocks is not to get scared out of them.” The lessons where you lose money are the ones that stick with you.

The first stock I bought went steadily down and ended up going into administration and the second I sold for a decent loss.

Investing your way

“Ever wonder why fund managers can’t beat the S&P 500? Because they’re sheep, and sheep get slaughtered.”

If you want to get good returns you have to invest in companies that are out of favour. You must avoid the crowded trades and not do what everyone else is doing. Avoid investing in hot stocks in hot industries. Trust your gut and your research.

Book smarts

“Most of these Harvard MBA types don’t add up to dogshit. Give me guys that are poor, smart, hungry and no feelings either”.

You could add CFA or any other fancy business degree. Investing is about discipline, temperament, common sense, and being able to handle falls of 20% in your portfolio while sticking to a plan.

Having a degree will not make you a better investor than someone who does not. Learning complex financial models and theory may even be a hindrance, as complexity and forecasts can come at the expense of simplicity and common sense. Having “no feelings either” harks back to the first quote about persistence and being able to handle losses and sharp market declines.

Stock prices rarely, if ever, increase steadily upwards. You need to be able to handle the inevitable falls that can and will eventuate. Sometimes these falls are temporary, a blip on the way to capital gains. Other times they act as a signal that your research has failed in this instance and it’s time to revisit your research or rethink your strategy. After all, as Gordon Gecko said, “the most valuable commodity I know of is information.”

 

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