We naturally fear the unknown, and the future is always unknown.
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No matter how calm you are, no matter how long term an investor you are, no matter what your horizons, when the market is jumping around, you feel uncertainty in your gut and it’s hard to resist that.
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Volatility gets you in the gut. There’s no question that when prices are jumping around, you feel different from when they’re stable.
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The times I have been most wrong are the times I thought I was most right.
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The main thing that experience taught me was a sense of humility and an awareness of the importance of surprise, that is, unexpected things happen.
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The most important lesson an investor can learn is to be dispassionate when confronted by unexpected and unfavorable outcomes.
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Unless you are that rarest of birds, someone who is cool under the rapid-fire, high-pressure decision making required to maximize your returns, let others take such risks, and allow your portfolio to plug along at a slower speed. In investing, tortoises tend to win far more often than hares over the turns of the market cycle.
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Volatility provokes the constant dread that some investors know more than we do, making us fearful of ignoring such powerful price movements.
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Many people pride themselves on being “long-term investors,” but acting deliberately when prices are bouncing around is not so easy.
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Markets are shaped by what I call “memory banks.” Experience shapes memory; memory shapes our view of the future.
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Faith in the long run is the most powerful force that drives investment decisions.
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In the end, the value of your portfolio is not what somebody tells you is likely to happen over the long run but how much other investors out there are going to be willing to pay you for your assets.
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What other people are doing in the market is not relevant to what you’re doing.
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When inflation is low, you feel that you know more about the future, and are much more willing to take risks.
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Gold, much more so than any other commodity, is about sentiment and psychology.
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As long as people are willing to pay foolish prices for things, no plan is foolproof.
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Corrections are unpredictable. By selling stocks to avoid pain, you can miss the next gain.
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There’s no such thing as a worry-free investment. The trick is to separate the valid worries from the idle worries, and then check the worries against the facts.
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There’s a psychological benefit to tossing the bums out: The names disappear from the monthly brokerage statements; we’re no longer reminded of our mistakes.
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It’s in the nature of Wall Street to imagine that whenever a company sets a record for earnings, it will go on setting new ones.
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With every company, there is something to worry about, but the question is, which worries are valid and which are not?
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The best time to get involved with cyclicals is when the economy is at its weakest, earnings are at their lowest, and public sentiment is at its bleakest.
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The very existence of doubt creates the conditions for a big gain in the stock once the fears are put to rest. The trick is to put your fears to rest by doing the research and checking the facts — before the competition does.
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If you own stocks, there’s always something to worry about. You can’t get away from it.
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The real problem is not finding a good fund manager, it’s finding the right time horizon for your investing and what your temperament is for volatility.
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The man in the street associates the acquisition of wealth with rising markets; failures, ruin, depression, panics with falling markets.
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The average trader is naturally a chronic bull. It is human nature to prefer optimism to pessimism.
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After a stock market decline, people may perceive more risk than before when, in fact, the decline may have taken some of the risk out of the market.
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There is no clear evidence from experience that the investment policy which is socially advantageous coincides with that which is most profitable.
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Day-to-day fluctuations in the profits of existing investments, which are obviously of an ephemeral and non-significant character, tend to have an altogether excessive, and even an absurd, influence on the market.
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I never in all my life bought a stock because I liked it. I bought it because it was a cheaper bargain than any similar stock I would buy anywhere in the rest of the world.
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As a rule, Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.
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The malady of commercial crisis is not, in essence, a matter of the purse but of the mind.
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It’s important to recognize that the riskiness of investing comes only partly from the things you invest in. A lot of the risk comes from the behavior of the participants.
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Almost any asset can be risky or safe, depending on how other investors treat it.
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I believe the market accurately reflects not the truth, which is what the efficient market hypothesis says, but it accurately and efficiently reflects everybody’s opinion as to what’s true.
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When things go badly, people become cautious. Then their caution causes things to go well, and when things go well, they become incautious. I think that’s a forever cycle.
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Potentially profitable, nonconsensus forecasts are very hard to believe in and act on for the simple reason that they are so far from conventional wisdom.
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Expertise is great, but it has a bad side effect. It tends to create an inability to accept new ideas.
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Crooks, crazies, egomaniacs, people full of resentment, people full of self-pity, people who feel like victims, there’s a lot of things that aren’t going to work for you. Figure out what they are and then avoid them like the plague.
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Most financial principles and theories have a degree of good sense to them. It may be a large degree, but it never comes close to being absolute.
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People do not care for the idea that any important activity which affects them is as beyond their control as a pair of dancing dice.
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It becomes more and more evident that stock prices are not alone determined by high or low credit, earnings or carloadings. There is another mighty factor which cannot be charted along with the various business indices. It is how high or how low are the hearts of men and women during the given period.
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Those with enterprise haven’t the money, and those with money haven’t the enterprise, to buy stocks when they are cheap.
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Economist picture a thousand buyers and sellers congregating in the market place to match their keen wits and finally evolve the correct price for each commodity. In the securities market particularly, the word of the ticker is accepted as law, so that one often thinks of prices as determining values, instead of vice-versa.
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The chief hazard of a careful common stock program is not that it may bring unexpected losses, but that its profits will turn the investor into a speculator greedy for quicker and bigger gains — and therefore headed for ultimate disaster.
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I think this business of greed — the excessive hopes and fears and so on — will be with us as long as there will be people.
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It is a safe prediction for me to make that, in future years as in the past, common stocks will advance too far and decline too far, and that investors, like speculators — and institutions, like individuals — will have their periods of enchantment and disenchantment with equities.
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Probably the largest aggregate losses are suffered by people who invest overenthusiastically in a basically sound company.
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A large advance in the stock market is basically a sign for caution and not a reason for confidence.
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Investors feelings and reactions regarding inflation are probably more the result of the stock market action that they have recently experienced than the cause of it.
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Most people sell stocks at low prices not because they have to but because they are scared.
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It is interesting to see how unpopular companies can become, merely because their immediate prospects are clouded in the speculative mind.
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Bull markets and bear markets last long enough so that the average trader is likely to forget by the time the climax is approaching that any sort of movement is possible.
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It takes a great deal of nerve to cling to a short position in a stock in the face of an advancing market even though the stock may clearly be overvalued.
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You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready. You won’t do well in the markets. If you go to Minnesota in January, you should know it’s gonna be cold. You don’t panic when the thermometer falls below zero.
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There is evidence that the stock market is more efficient in processing information about what other investors are doing than it is in processing fundamental information about the underlying assets, which is why stock prices so often turn out with hindsight to have been crazy rather than rational.
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At some point, we will have a major correction and everybody will get scared again, and we will have another buying opportunity.
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When you have a family, and a house, and the market is going down, and you’re on margin, it’s probably too much pressure for you to do the right research and the right kind of thinking to make good decisions.
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It’s not as simple as having timid people and bold people. Some people will be risk averse in one circumstance and not so averse in another. It’s oversimplifying human nature to think we can put people into those two categories as the only psychological measure we use.
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The problem with the markets is that they are just like people, and individual investors can easily get confused.
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People are guided largely by intuition, and it’s sometimes shocking the way they think.
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The market’s very emotional but over time, doing something logical and systematic does work. The market eventually gets it right.
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The psychological mood of people changes more drastically than anything else in finance. Human nature changes least of all.
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To some degree, it is the consequence of the very instability of investors’ thinking — the very variation in investor confidence — which leads them to view the picture through rosy glasses one year and through dark glasses the next year.
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If you totally divorce economics from psychology, you’ve gone a long way toward divorcing it from reality.
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Beating the market averages, after paying substantial costs and fees, is an against-the-odds game; yet a few people can do it, particularly those who view it as a game full of craziness with an occasional mispriced something or other.
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Perhaps the most important rule in management is “Get the incentives right.”
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The whole trick in life is to get so that your own brain doesn’t mislead you.
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If you’re going to be in this game for the long pull, which is the way to do it, you better be able to handle a 50% decline without fussing too much about it.
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If you’re capable of being reasonable, it’s a moral failure to be unreasonable when you have a capacity to be reasonable.
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Gambling is a tax on ignorance. People often gamble because they think they can win, they’re lucky, they have hunches, that sort of thing, whereas in fact, they’re going to be remorselessly ground down over time.
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Shortsighted things that people sometimes do for their individual self-interest don’t tend to work out well in the long run.
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There is no great secret in fortune making. All you have to do is to buy cheap and sell dear, act with thrift and shrewdness and then be persistent.
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Herding is not necessarily something one does as the result of analysis. It is what one does when one’s confidence is impaired.
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Never underestimate the man who overestimates himself. These weird guys who overestimate themselves occasionally knock it right out of the park.
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It’s absolute cockamamie crazy to sell stocks after they drop. Instead, you should say, “Today there’s a first-rate bargain and I’m buying.”
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If you go to the stock market because you want excitement, then sooner or later you will lose.
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Be skeptical of the popular reasoning behind any spectacular move in the stock market — but don’t be too sure this reasoning is wrong.
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We must remember that delusions swing between extremes, like pendulums. Delusions of grandeur and unending wealth give place to delusions of unending gloom. One is as unreal as the other.
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Whether stocks rise or fall is determined by innumerable forces and elements, by economic conditions, the actions of governments, the state of international affairs, the emotions of people — even the vagaries of the weather.
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People invest in stocks for two opposite reasons — in hope and confidence in the future of an enterprise or in fear that the value of their capital will be lost through inflation.
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The stock market registers the judgments of multitudes of buyers and sellers about the many factors which affect business — what business is like today; what it will be like in the future.
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The impression has built up that the stock market is the cause of booms and busts. Actually, it is the thermometer — not the fever.
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Allied to the general pattern of market movements is the general pattern of speculative thinking.
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If the relative stability of general business and corporate profits produces an unlimited enthusiasm and demand for common stocks, then it must eventually produce instability in stock prices.
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My experience leads me to predict that the action of the market will govern the investor’s choice as to probable future growth rates, rather than vice-versa.
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The market cycle will once more prove to be the human-nature cycle; its economic background will have changed, but not its basic character nor the consequences of its character.
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Good common stocks are investment media which are subject to speculative influences. The speculative influences are not in the common stocks; they are in the minds of the people who buy and sell them.
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It is very hard to think against the crowd, especially when the crowd is practically universal and unanimous in thought and emotion.
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