7 Key Quotes from Investor Bill Ackman That Can Make You Richer

Bill Ackman is the billionaire investor behind the hedge fund Pershing Square Capital and one of the most prominent investors of the past two decades. Ackman typically takes large positions in stocks that are temporarily out of favor or where the value has yet to be realized. He often uses the media to promote his positions—whether it’s a long investment or one he believes will decline, such as his widely discussed short bet against Herbalife.

Although Ackman has shown considerable success, he’s also had high-profile failures. In either case, he displays unwavering confidence. For much of his career, he worked as an activist investor—buying stakes in companies and then trying to convince them to make changes, such as selling or spinning off a division—though he has recently moved away from this approach.

Below are seven key investment lessons from Bill Ackman for achieving success.

Key investment quotes from Bill Ackman

1. Invest aggressively in your best ideas
   Ackman believes in the value of a concentrated investment portfolio, where the majority of his fund’s capital is invested in the stocks he has the highest conviction in.

“I think most investors over-diversify because they’re lazy,” says Ackman. “They haven’t done enough research on any of their companies. If you have 200 positions, do you think you know what’s going on in any of those companies right now?”

Ackman prefers a concentrated portfolio because it can outperform the market. If you pick a portfolio of hundreds of stocks, its performance will generally mirror that of the S&P 500 index, which includes hundreds of leading American companies. On the other hand, if you pick individual stocks and are skilled at it, you can invest in the best companies that are poised to outperform—generating returns above the market average of 10 percent.

While diversification may not appeal to highly skilled investors, it allows less experienced investors to earn solid returns with little effort and knowledge. In fact, legendary investor Warren Buffett says that nearly all investors would benefit more by simply buying and holding an index fund that tracks the S&P 500.

But for Ackman and other investors who aim to beat the market, concentration is key.

2. Be confident even when you’re wrong
   It’s important to build an investment process that allows you to maintain confidence, even if it turns out you’re wrong. With confidence and a good process, you can make difficult decisions, such as buying more when a stock declines and the investing world questions your judgment.

“If I believe I’m right, I’ll go to the ends of the earth until I’m proven right,” says Ackman.

Ackman has made some excellent investments over the years, including in the once-bankrupt mall owner General Growth Properties, as well as in Starbucks and Chipotle. But he’s also had some major failures, including the short position against Herbalife, where he lost $1 billion while maintaining his confidence—even after a public TV dispute with fellow investor Carl Icahn.

3. Don’t fall in love with your investments
   It’s easy to become emotionally attached to an investment, but Ackman advises against this.

“I’m not emotional about investments,” he says. “Investing is something where you have to be purely rational and not let emotions affect your decision making—just the facts.”

Short-term traders must constantly assess whether it’s worth buying, selling, or holding a stock compared to other potential investments. Active traders really need to avoid “marrying” a stock and should be ready to part with it when the risk/reward ratio becomes unattractive.

4. Understand that the market can do anything in the short term
   A good investment process is focused on truth—whether a stock is undervalued, how good the business is, and why. The investor seeks to discover the real value and direction of the stock over time, even if it’s out of favor or moves unfavorably after purchase. But in the short term, a stock can behave in any way depending on traders’ actions.

“The market shows you in the short term what a group of people believe. That doesn’t mean they’re right,” says Ackman.

5. Listen to what the ‘other side’ says
   As an investor, it’s important to hear the arguments of the “other side” to better understand why a stock may or may not be attractive. Many big investors pay attention to short sellers—those who profit from a stock’s decline.

“Short sellers are like canaries in a coal mine,” says Ackman. “They are early warning signals of trouble in a business or capital markets.”

6. Don’t invest for ego
   Many people invest to feel part of a group and gain ego satisfaction, but Ackman warns against this.

“To be successful, you have to make sure that rejection doesn’t affect you at all,” he says.

7. Stay optimistic
   As an investor and just in life, it’s important to stay optimistic, Ackman suggests.

“Few people in the world achieve anything without optimism,” he says.

As the S&P 500 chart shows—it keeps growing in the long run—if you remain optimistic and keep investing, you can earn significant amounts from the market.