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The Top Investment Quotes Every Investor Should Know

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Investment Quotes

Investment Quotes

This infographic is available as a poster.

The Top Investment Quotes Every Investor Should Know

Quotes can have lasting impressions. They can also tell a story.

From Warren Buffett to John Maynard Keynes, the financial greats offer insights that often last for decades. Not only have they lived through several market cycles, their understanding of the market is foundational to their success.

In this infographic from New York Life Investments, we distill five timeless investment quotes and explore the data behind their insight.

Top 5 Investment Quotes for Investors

What investment quotes can we learn from today?

1. “The most important quality for an investor is temperament, not intellect.”

— Warren Buffett, CEO of Berkshire Hathaway

Often, emotions influence trading activity. Consider how investors traded 10x more in the first quarter of 2020 than in 2009.

Here are three fear indicators that can lead to these trading spikes:

  • Volatility: Higher Cboe Volatility Index (VIX) reading indicates higher fear.
  • Stock Price Strength: A greater number of stocks reaching 52-week lows versus 52-week highs indicates higher fear.
  • Bond vs. Stock Performance: When bonds outperform, it can indicate higher fear.

Yet, in spite of extreme investor fear, the S&P 500 has proven resilient. The index had positive performance in 32 of the last 42 years.

2. “The individual investor should act consistently as an investor and not as a speculator.”

— Benjamin Graham, author of The Intelligent Investor

Benjamin Graham, the father of value investing, had an enormous influence on Warren Buffett. One of his many core insights includes recognizing the difference between an investor and a speculator:

  • Investor: Focused on safety of principal and reasonable return.
  • Speculator: At risk of losing potentially the entire principal.

Rather than seeing an investment as simply a ticker symbol, Graham says, think of an investment like having a partial ownership in a business.

When investors think like an owner, they look for the intrinsic value of the company in the long term, which can compound in value over time.

TimeMonthly ContributionAnnual ReturnInterest Earned on Investments
Year 1$2007%$14
Year 11$2007%$231

In a relatively short period of time, the investor is earning $231 on a $200 monthly contribution.

3. “The biggest risk of all is not taking one.”

— Mellody Hobson, co-CEO of Ariel Investments

Mellody Hobson, co-CEO of Chicago-based Ariel Investments, became president at just 31. Today, Ariel manages over $18 billion in assets. As the head of two major firms (she is also chairwoman of Starbucks), Hobson understood the importance of taking the first step.

We show an example of a potential benefit of starting early:

InvestorContribution TimelineMonthly ContributionAnnual Rate of ReturnTotal Contribution AmountEnd Portfolio Value
Investor AAge 25-35$2007%$24,000~$300,000
Investor BAge 35-65$2007%$72,000$245,000

As the above table shows, Investor A contributed just $24,000, outperforming Investor B—who contributed 3x more ($72,000) over their lifetime. By age 65, Investor A’s portfolio value was worth nearly $300,000 while Investor B’s stood at $245,000.

Investing early is especially timely given today’s inflationary environment. Over time, inflation erodes the value of the dollar and, in turn, a person’s overall wealth.

4. “Time in the market beats timing the market.”

— Ken Fisher, founder of Fisher Investments

If an investor tried to time the market and missed the best performing days over the last century, they would have earned just a fraction of the total returns. Staying invested led to over 17,000% returns, yet missing the 10 best days over each decade led to returns of just 28%:

DecadeS&P 500 Price ReturnExcluding Best 10 Days Per Decade
1930-202017,715%28%
202018%-33%
2010190%95%
2000-24%-62%
1990316%186%
1980227%108%
197017%-20%
196054%14%
1950257%167%
194035%-14%
1930-42%-79%

Source: Bank of America, S&P 500 returns (Mar 2021)

Historically, the biggest drops in the market often happen just before the largest upswings, meaning that opportunities can be easily missed.

Even the top investors have trouble timing the market at every turn.

5. “It is better to be roughly right than precisely wrong.”

— John Maynard Keynes, father of modern macroeconomics

When markets are volatile, diversification can help investors temper its effects. Consider the following example that shows the advantages of diversification.

Annual Total Returns 1950-2020Large Cap EquityBonds50/50 Portfolio
1-Year Rolling Low-39%-8%-15%
1-Year Rolling High47%43%33%

Source: Bloomberg Finance L.P., FactSet, J.P. Morgan Asset Management; Robert Shiller, Strategas/Ibbotson, US Federal Reserve (2021)

When investors blended stocks and bonds in their portfolios over a one year period, the downside was sharply reduced.

Annual Total Returns 1950-2020Large Cap EquityBonds50/50 Portfolio
5-Year Rolling Low-3%-2%1%
5-Year Rolling High28%23%21%

Source: Bloomberg Finance L.P., FactSet, J.P. Morgan Asset Management; Robert Shiller, Strategas/Ibbotson, US Federal Reserve (2021)

Meanwhile, over the last seven decades, a combination of stocks and bonds has never produced a negative return across a five-year rolling period.

Learning from Historical Insight

The above five investment quotes can arm investors with investing lessons that often are easy to forget:

  • React logically, not emotionally
  • Leverage compound interest
  • Start early
  • Stay invested
  • Diversify

With insights drawn from those who have shaped the financial world, investors can better position their portfolios for success.

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Infographics

Rising Rates: Why Value Stocks Have Outperformed

During periods of rising interest rates, value stocks have historically outperformed growth. Below, we explain the factors behind this trend.

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Value Stocks

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The Benefits of Value Stocks in Rising Rate Environments

As investors flock to safety, value stocks have outperformed growth stocks year-to-date amid economic turbulence and rising interest rates.

Owing to their strong fundamentals and cash flows, value stocks may be returning into favor.

In this infographic from New York Life Investments, we illustrate why value stocks offer opportunities in rising rate periods.

Recent Performance

In a matter of two years, the Ukraine war, supply chain shocks, and COVID-19 have led inflation to multi-decade highs.

Amid these complex struggles, value stocks have outperformed significantly.

  • Russell 1000 Value Index: -1.1%
  • Russell 1000 Growth Index: -14.1%
  • S&P 500: -8.4%

As of April 14, 2022

With higher inflation predicted for the medium term, value stocks may be staging a comeback.

As investors look to de-risk their portfolios, many are turning to value stocks, thanks in part to their historical outperformance during inflationary and rising rate periods.

Value vs. Growth: Key Characteristics

As a quick refresher, here are the key distinctions between value stocks and growth stocks.

CharacteristicValue InvestingGrowth Investing
Defining FeaturesCompanies with stronger cash flows, steady income, priced below intrinsic value.Companies with lower cash flows, low (if any) income, strong earnings growth potential.
ValuationUndervalued (low P/E ratios)Overvalued (high P/E ratios)
DividendsMore commonLess common
VolatilityLowerHigher
SectorsFinancials, Energy, Healthcare, IndustrialsTech, Communications, Consumer Discretionary

Cyclical sectors such as financials and energy often benefit when prices increase after an economic contraction.

Since companies earn money in different ways, it is often useful to compare price-to-earning (P/E) ratios within a sector. A P/E ratio is a metric for valuing a company, where a company’s stock price is divided by its earnings per share.

An overvalued company in the tech sector may have a P/E ratio of 100, while the S&P sector average is 24. By contrast, an undervalued healthcare company may have a P/E ratio of 14, lower than the S&P sector average of 16.

When a company is undervalued it means that it’s trading below its intrinsic value.

Value vs. Growth: Performance

Looking back, the previous decade saw the worst performance for value in the last 90 years.

On average, growth outperformed value by 7.8% annually since 2010. However, looking at 10-year periods, value has outperformed growth over every decade since the 1940s.

DecadeValue Outperformance
1930s-0.5%
1940s10.8%
1950s5.6%
1960s4.2%
1970s8.1%
1980s7.4%
1990s0.7%
2000s8.0%
2010s-2.6%

Average annual performance of Fama and French (“HML”) value factor by decade.
Source: Fama & French via Mercer (Mar 2021)

Now, against economic uncertainty and other structural shifts, the growth and value divergence is beginning to change for the first time in over a decade.

What is Driving Value Stocks?

On a broader level, the following forces have driven outperformance in value stocks and growth stocks.

 Value InvestingGrowth Investing

Broad Market Factors
  • Rising interest rates
  • Market recovery
  • Inflationary environment
  • Long-term earnings track record
  • Low interest rates
  • Bull market
  • Disinflationary environment
  • Rising corporate earnings

So how do these apply today?

In an inflationary (and rising rate) period, current earnings become more valuable and future earnings become less valuable. Typically, “value stocks” are assessed based on their current earnings while “growth stocks” are valued on their future earnings.

Consequently, inflationary periods have tended to favor value stocks and deflationary periods have tended to favor growth stocks. When prices are climbing, companies with actual earnings are potentially better positioned to increase prices and retain profit margins.

At the same time, it is important for investors to avoid value-traps, which are companies trading below value that are in financial duress. To help mitigate this challenge, active investment managers can help identify the appropriate companies.

Sign of the Times

It’s worth noting that this isn’t about value vs. growth. Instead, different styles have performed better at different times. Of course, it’s important for investors to consider a number of variables for their portfolios:

With these in mind, investors can implement the best strategies to help achieve their goals.

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Infographics

How to Optimize Retirement Plan Design for Your Client

Here’s how advisors can enhance retirement plan design to help employees and plan sponsors reach their retirement goals.

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Retirement Plan Design

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How to Optimize Retirement Plan Design for Your Client

More than ever, retirement plans are looking at an employee’s entire retirement picture.

In line with this trend, advisors are offering personalized services to help people reach their goals. But as retirement plans begin to expand their products and services, unidentified gaps remain in employees’ retirement needs.

To help advisors identify these disconnects, this infographic from New York Life Investments shows the key priorities across both employees and their employers to help optimize retirement plan design.

Are People Achieving Their Retirement Vision?

Today, retirement is an issue that can no longer be ignored.

Nearly 70% of Americans say the country faces a retirement crisis and 54% are worried about a financially secure retirement. Making matters worse, the pandemic has led one in three workers to rethink their retirement timeline.

To look deeper into retirement plan design, NYL Investments partnered with RTI Research, surveying 800 people:

  • 500 Plan Participants: Employees with 401(k)/ 403(b) plans
  • 150 Plan Sponsors: Companies offering 401(k) plans
  • 150 Plan Providers: Advisors providing 401(k) services

Here are the results they found.

Preparedness for Retirement

Two structural trends—lack of savings and not having access to a retirement plan at work—are impacting retirement readiness today.

By a significant margin, the survey found that men (45%) feel more prepared for retirement than women (30%), which may be explained by historically higher earnings.

How does retirement preparedness break down by age group?

AgeVery Well PreparedSomewhat PreparedNot Very Well Prepared
20s45%23%21%
30s42%44%14%
40s30%41%29%
50s34%38%28%
60s37%53%9%
Average37%42%21%

On average, 37% of employees felt very prepared. Despite those in their 40s often hitting their highest-earning potential, employees in this age bracket felt the least prepared.

Retirement Plan Features

What aspects of their retirement plan did survey participants feel very satisfied with?

Feature% Who Feel Very SatisfiedSomewhat PreparedNot Very Well Prepared
Employer commitment to retirement preparedness58%23%21%
Plan provider62%44%14%
Plan performance58%41%29%
Ease of account management66%38%28%
Number of investment options given58%53%9%

Compared to other variables, participants felt most satisfied with the ease of account management of their retirement plan along with their plan provider.

Retirement Plan Design: 3 Key Priorities

When it comes to actual planning for retirement, what were the three most important factors among participants?

  • Right balance of growth & risk in portfolio: 84%
  • Saving enough for retirement: 86%
  • Work-life balance: 87%

Interestingly, the importance of work-life balance increased with age.

While 78% of people in their 20s said this was very important, it increased to 92% of people in their 50s. The same pattern emerged for having enough savings for retirement. Over 75% of people in their 20s said this was extremely important. For those in their 50s, this jumped to 96%.

Retirement Plan Design: 3 Gaps

Let’s now look at some of the biggest gaps in retirement plan design. Here is where participants were least satisfied with their plan provider:

Service% Satisfied
Managing the cost of healthcare53%
Having a roadmap to ensure I’m doing the “right thing” to plan for retirement57%
Working to get out of debt67%

As the above findings suggest, not only are participants looking for guidance with their 401(k) investments, they are looking for personal financial advice on managing debt and healthcare costs.

These gaps make sense: the U.S. has the highest healthcare costs in the world, averaging $12,500 per person per year or three times higher than the OECD country average.

The Employer’s Perspective

Let’s now take a look at how employers viewed retirement plan design.

Retirement Plan Design: Key Priorities

Across all firms, what were the three most important factors for their employees?

  • Managing the cost of healthcare: 90%
  • Saving enough for retirement: 85%
  • Work-life balance: 85%

Both employers and employees alike placed saving enough for retirement near the top.

Retirement Plan Design: 3 Gaps

Which services do employers offer the least?

Service% Offered
Working to get out of debt23%
How to access Social Security and other retirement accounts33%
Saving enough for retirement34%

Interestingly, while 85% of employers place saving enough for retirement as a key priority, the vast majority of employers don’t offer these services in retirement plans.

To address these gaps, advisors can create a well-thought-out financial wellness program for employers that bridges the disconnect.

Understanding the Disconnect

Over the last five years, retirement plans that offer advice have risen 44%.

The evidence is clear: employers value providing their employees personalized advice. Here are some key insights on providers, and where the disconnects lie.

Plan Providers: Key Disconnects

While 93% of all plan providers surveyed offer advisory services, just 62% offered services that were educational.

Meanwhile, younger advisors felt employees had stronger financial literacy and knowledge of retirement services compared to more tenured advisors by a wide margin. A similar trend followed for advisors at smaller plan providers versus larger firms.

However, more tenured advisors at larger firms were more likely to offer in-person consultations at the workplace. The same was true for providing employees with information to make more informed investment decisions.

Next, while some of the largest disconnects from participant and employer needs center around managing debt and healthcare costs, the majority of plan providers don’t offer them:

3 Gaps in Providers% Offer Service
Working to get out of debt35%
Managing cost of healthcare29%
Work-life balance34%

Importantly, new opportunities arise when advisors connect with participants and employers in areas that matter most.

Optimizing Retirement Plan Design

When employees and sponsors are active participants in their retirement journey, advisors can provide human-centered advice, personalized skills, and holistic planning models.

Based on the above findings, advisors can strategically enhance retirement plan design to align with participants’ and employers’ financial needs.

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