You can learn a thing or two from the lasting wisdom of the world's greatest generals.
Duty, honor, integrity, and, believe it or not, investment strategies.
We've put together a list of 13 brilliant insights from military leaders that are just as relevant to investors as they are to soldiers.
After all, there's nothing more important than character and brains.
Be wary of the day-to-day noise, and focus on the long term and big picture.
President Harry S. Truman promoting Gen. Omar Bradley to five-star rank on September 22, 1950.
Gen. Omar Bradley
"It is time that we steered by the stars, not by the lights of each passing ship."
There's a lot of noise when it comes to the markets — whether the daily chatter of Finance Twitter, the talking heads on business television, or the high-frequency sell-side research notes. But that doesn't mean you have to listen to all the hysteria. And as Benjamin Graham noted, "It is absurd to think that the general public can ever make money out of market forecasts."
Don't forget to reallocate your portfolio with time.
Napoleon
"One must change one's tactics every 10 years if one wishes to maintain one's superiority."
As you get older, it's important to change up your portfolio. For example, manyrecommend that as people get closer to retirement, they should gradually shift into bonds.
Source: Words from the Wise
Take the time to do your homework.
Major Gen. George S. Patton and Rear Adm. H. Kent Hewitt aboard of USS Augusta in North Africa in 1942.
Gen. George S. Patton
"Take calculated risks. That is quite different from being rash."
"We're all just guessing, but some of us have fancier math," Josh Brown once tweeted. As Peter Lynch noted, however, "investing without research is like playing stud poker and never looking at the cards."
Use your brain.
Gen. James "Mad Dog" Mattis
"The most important 6 inches on the battlefield is between your ears."
Your brain can be the source of your downfall thanks to emotions like fear and greed. Nevertheless, your brain is your greatest asset as an investor if you use it well. As Howard Marks wrote: "Smart investing doesn't consist of buying good assets, but of buying assets well. This is a very, very important distinction that very, very few people understand."
The best time to buy a company is when it's in trouble.
Sun Tzu.
Sun Tzu
"In the midst of chaos, there is also opportunity."
Warren Buffett once said he liked to buy companies when they get into short-term trouble, or, "when they're on the operating table."
Source: Bloomberg Businessweek, The Art of War
Don't get too comfortable with your models and equations.
Gen. MacArthur observing the naval shelling of Inchon from USS Mount McKinley, September 15, 1950, with Brigadier Gen. Courtney Whitney, left, and Major Gen. Edward M. Almond.
Gen. Douglas MacArthur
"There is no security on this earth; there is only opportunity."
There's no absolute foolproof equation in life — and there's definitely no absolute foolproof equation in investing. As Barton Biggs wrote, "quantitatively based solutions and asset allocation equations invariably fail as they are designed to capture what would have worked in the previous cycle whereas the next one remains a riddle wrapped in an enigma."
Be greedy when others are fearful.
Napoleon
"Men are moved by two levers only: fear and self-interest."
As most investors know, one of Warren Buffett's best-known nuggets of wisdom is that investors should aim to "be fearful when others are greedy and greedy only when others are fearful." Emotions like fear force people to make bad decisions, which presents opportunities.
Beware the herd.
Gen. George S. Patton
"If everybody is thinking alike, then somebody isn't thinking."
It's hard to do the unpopular thing sometimes. But careful investors often buy stocks that look bad and hold on to them until their value is recognized, mutual fund investor John Neff wrote.
Know whom and what you are investing in.
Sun Tzu
"Know thyself, know thy enemy. A thousand battles, a thousand victories."
Businesses you are investing in aren't "thy enemy," per se. It's important, however, to know the philosophy and personalities of the company's founders, who is running it, and the ambitions and plans of the people building its future, according to Thomas Rowe Price Jr.
Source: Ritholtz.com, The Art of War
Don't forget to read and use history.
Gen. James "Mad Dog" Mattis
"The problem with being too busy to read is that you learn by experience (or by your men's experience), i.e. the hard way. By reading, you learn through others' experiences, generally a better way to do business, especially in our line of work where the consequences of incompetence are so final for young men ... Ultimately, a real understanding of history means that we face NOTHING new under the sun."
Investment professional Ken Fisher also advocated using history "as one tool for shaping reasonable probabilities." (Within reason.)
If you don't have integrity, you have nothing.
Pericles
"When you realize [Athens'] greatness, then reflect that what made her great was men with a spirit of adventure, men who knew their duty, men who were ashamed to fall below a certain standard."
KKR cofounder Henry Kravis wrote: "If you don't have integrity, you have nothing ... You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing."
Source: Academy of Achievement, Thucydides' History of the Peloponnesian War
Don't confuse perception with reality.
Gen. George S. Patton
"Many soldiers are led to faulty ideas of war by knowing too much about too little."
The Motley Fool noted that in 2009 the S&P 500 gained 27%. Huge. But 66% of investors thought that it fell that year, according to a survey by Franklin Templeton.
Source: The Motley Fool, We Are The Mighty
Maintain your long-term strategy during times of volatility.
Napoleon's definition of military genius:
"The man who can do the average thing when all those around him are going crazy"
Warren Buffett champions the stay-calm-when-all-hell-breaks-loose strategy. At the height of the financial crisis, he wrote in The New York Times:
Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
Source: The Motley Fool, Business Insider
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