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Investment philosophies of well-known stock market gurus on gold and silver

In the following, the investment philosophies of some investment legends are presented in order to derive insights for optimizing the investment strategy in the precious metals sector:

Ben GrahamBenjamin Graham was a legendary investor. However, his main merits resulted primarily from his work as an economist, which still strongly influences investors today.[1] He is considered the father of fundamental securities analysis and so-called value investing. He used ratios such as price-to-sales ratio (P/S ratio), price-to-earnings ratio (P/E ratio), price-to-cash-flow ratio (P/C ratio), price-to-book ratio (P/B ratio), dividend yield, leverage ratio, return on equity, earnings growth, earnings value or liquidation value to value companies. He held the view that a stock was worth buying only if it was trading on the stock market below its fundamental value. His students at Columbia University included arguably the most famous investor of all time, Warren Buffett.



Warren BuffettWarren Buffett (who bought 4 thousand tons of silver in 1997, which he considered undervalued) was inspired by his study mentor Benjamin Graham.[2] In addition to quantitative criteria of fundamental securities analysis, Buffet emphasizes qualitative criteria such as the quality of management. Before buying a security, itsintrinsic value should be determined. Investments should only be made if the intrinsic value exceeds the stock market value. Buffett himself explained his philosophy as follows: "We invest in a company only if (1) we understand the business, (2) the company's long-term prospects are good (proven earning power, good returns on invested capital, no or little debt, attractive business), (3) the company is run by competent and honest managers, and (4) is very attractively valued."[3] In his view, one must be willing to concentrate on a few holdings. He rejects excessive diversification as well as speculation. Instead, he sees himself as an investor, a shareholder in a few, handpicked companies.


Andre KostolanyAndré Kostolany is the most popular stock market guru, who became famous for his stock market wisdom.[4] Kostolany holds the view that one has to deal intensively with an investment and understand it. He also considered intuition and imagination to be important for successful investment decisions. One must have the imagination to anticipate future price increases before everyone realizes it, he said, because the price increases will have already occurred by then.



Harry Markowitz Harry M. Markowitz received the Nobel Prize in Economics in 1990 for his work on portfolio management. He summarized his investment philosophy as follows: "A good portfolio is more than a long list of securities. It is a balanced unit that offers the investor equal opportunities and protection among a variety of possible future developments. The investor should therefore work toward an integrated portfolio that takes into account his or her individual needs."[5]



Peter LynchPeter Lynch is a successful author and portfolio manager.[6] His value approach focuses on broad diversification and growth stocks. He characterizes his investment principles, which are based on common sense and knowledge of psychological factors, as follows:[7] (1) Understand what you own. (2) Focus on current facts, not time-wasting predictions of the future. (3) You have enough time to identify outstanding companies. (4) Avoid guesswork and focus on investing. (5) Invest in companies that even a fool could run. (6) Be flexible if the assumptions don't come true but the investment works out - and vice versa. (7) You must be able to explain the rationale for a stock purchase in three sentences so that an eleven-year-old can understand it; sell as soon as the terms are no longer valid. (8) The key to successful investing is not intellect, but gut feeling.


Lessons from the investment philosophies of investment legends

What lessons can be learned from the investment philosophies of investment legends for precious metals investing? In the following, central aspects of these approaches are put into a stringent order - the ten commandments of investing in precious metals:

  1. An investment should only be entered into if its market price is below its fundamental intrinsic value.
  2. The value of an investment should be determined by quantitative and qualitative indicators.
  3. An investment should be understood and the rationale explained in a few sentences.
  4. One should avoid assumptions and time-wasting forecasts about the future and concentrate on current facts.
  5. You have a lot of time to find good investments, you do not need to be deterred by increases in value that have already taken place.
  6. You have to be convinced of an investment yourself, otherwise it is not a good investment, no matter what others say.
  7. Intuition, imagination and the feeling for market psychological factors are more important than intellect and opinions of experts.
  8. One should concentrate on investments of which one is convinced of the long-term prospects of success.
  9. If the conditions for entering the investment are no longer given, one should sell.
  10. One should keep the investment only if it works, even if the original expectations did not come true.

Three things become clear here: (1) investment legends see many things similarly, (2) the individual points are easy to implement if you take the time, (3) the list can be transferred 1 to 1 to investments in the precious metals sector. Of course, everyone has to decide for himself whether or not to take advantage of the associated opportunities, loosely based on the Italian philosopher Dante Alighieri: "One waits for the times to change, the other seizes them vigorously and acts."[8]