Investor Psychology

Learn from the World's Great Investors

Six luminaries share their outlooks and investment strategies.

WARREN BUFFETT Chairman, Berkshire Hathaway I have no idea what the stock market's going to do tomorrow, or next week, or next month or next year. But over a ten-year period you will do considerably better owning a group of equities than you will owning Treasuries. In fighting the economic war, we've taken action that sows the seeds of substantial inflation down the road. Not in the next six months or year, but ten years from now the dollar will buy a lot less than it buys today.

BOB RODRIGUEZ Chief executive officer, First Pacific Advisors

Don't run with the herd. Being surrounded by people who are doing the same thing as you offers a false sense of protection. Being a loner is extremely uncomfortable, but it's far better. Today, being a loner means owning short-maturity, high-quality debt on the bond side. And if the U.S. government continues to blow up the nation's balance sheet through massive deficits, you should probably move at least 20% to 40% of your assets out of the U.S.

JEREMY GRANTHAM chief investment strategist, Grantham, Mayo, Van Otterloo The recent rally has been very speculative, favoring risky assets over the past few months. I'm sorry if you missed investing at the market's March lows, but don't compound the damage to your portfolio by chasing gains in risky assets. We're at the beginning of a seven-year period of lean returns. You should only be buying the highest-quality blue-chip com­panies, where valuations are most attractive.

BILL GROSS Co-chief investment officer, Pacific Investment Management Co. The biggest danger right now is that you'll earn 0% on mattress money, or virtually 0% in a money-market account or at the bank. Yes, that money is safe, but the economy and inflation may come roaring past you at higher levels. You also have to consider diversifying outside of the U.S. The dollar is a weak currency, and as it devalues against other currencies, our standard of living will suffer. Higher returns relative to risk lie in Asia and Brazil.

MARTY WHITMAN Co-chief investment officer, Third Avenue Management Do what we do: Find extremely well-financed companies that do not rely on continuous access to the bond or stock markets for refinancing, that are run by competent management teams and that have favorable prospects for growth. Buy these companies' stocks when they are available at a meaningful discount. All other systems of investing are concerned with predicting stocks' near-term price movements.

JIM ROGERS Chairman, Rogers Holdings Diversification is garbage -- it's something brokers invented to avoid getting sued. You only need four or five good ideas in your life to get really rich if you avoid mistakes. And the one way to avoid mistakes is to stick with what you know, whether it's clothes or cars or commodities. Then, when you see a major development in your area of expertise, you'll know better than Wall Street when to buy or sell. Otherwise, you should put your money in the bank.

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