It is only fair to admit that the commonest and most expensive blunder that all exceptionally brilliant business men make is being right too soon.
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One of the most remarkable things about the investing world is how (correctly) venerated Warren Buffett is and how completely people ignore his investing advice.
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I’ve made so many mistakes over the years that I struggle to isolate just one as the biggest single mistake. Among the choices though I think excessive leverage has been the most personally painful.
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The most common error in investing is confusing business fundamentals with investment merit.
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Being wrong is something anyone involved in capital markets has to get used to, though being used to it and being comfortable with it are two different things.
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People who have had success in other parts of their lives have difficulty accepting how much failure there is in the stock market.
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In investing, where doing nothing often prevents blunders, a certain style of laziness is adaptive, but mental laziness isn’t, and not thinking independently is absolutely toxic.
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Call it humility, call it honesty with yourself, but failing to admit to investment mistakes means failing investing.
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Extrapolating existing conditions too far into the future is likely to lead to disappointment. But as long as people continue to make this mistake, and as long as the market consensus reflects it, history will continue to repeat itself in Wall Street.
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Faith in the future is as much motivated by confidence as it is a reflection of fear in acknowledging a mistake.
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Many investors get “nickeled and dimed” into penury by failing to appreciate that the first loss is not only the best, but usually the smallest. They must learn to avoid defensive rationalization of their past bad judgments.
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Most investors underestimate the stress of a high-risk portfolio on the way down.
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Too many investors fail to follow some simple, time-tested tenets that improve the odds of achieving success and, at the same time, reduce the anxiety naturally associated with an uncertain undertaking.
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Almost every value trap is the result of people extrapolating past returns on capital and past valuations onto a different situation today.
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Nearly every mistake I’ve made has been because I picked the wrong people, not the wrong idea.
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Some might see buying and creating value from others’ mistakes as a form of exploitation, but I see it as giving neglected or devalued assets, in any industry, new life.
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One of the biggest mistakes investors make is to look at the last few years and assume that’s the new norm.
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Pro-cyclical behavior is one of the greatest and one of the most frequent mistakes.
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The truth is markets are made up of people, with their emotions, insecurities, their tendency to go to extremes, and their other foibles. Thus, they often make mistakes and swing to erroneous extremes.
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A lot of people when they get negative on the market put 50% in cash, but unfortunately a lot of times when you get to that position it’s just about when the market’s about to rally.
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My record on long shots is horrible. A tiny airline I recommended two years ago went bankrupt.
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I think it’s dangerous to buy companies that everyone thinks are excellent and that are relatively slow-growth companies.
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I think that most individual investors make great mistakes when they try and time the market, and try and think about what’s the best stock to buy now.
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The biggest problem that people have isn’t selecting the right money managers. It’s the way they change managers all the time in response to fluctuations of short-term performance.
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A lot of people look to hit singles and sacrifice bunts and make small returns. But statistically you are far better off with huge gains because you are going to make mistakes. And if you are playing small ball and you make a few mistakes, you can’t recover.
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People go to the library and they do incredible research on a microwave oven. And then they’ll go out and spend $10,000 on a stock because they heard a tip on the bus.
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One of the biggest mistakes you can make is to think that overpriced and going down tomorrow are synonymous. Markets that are overpriced often keep going.
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There’s something intellectually much more intriguing about failure, which is knowable, rather than success, which is sort of unknowable.
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There are two principal mistakes that nearly all amateurs in the stock market make. The first is to have an inexact knowledge of the securities in which one is dealing, to know too little about a company’s management, its earnings, and prospects for future growth. The second mistake is to trade beyond one’s financial resources, to try to run up a fortune on a shoestring.
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When people are looking for performance they sharpen their pencils and find reasons to buy.
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You know, we make mistakes. Some go from 12 to 10 and we sell them. Some go from 20 to nothing. In a 10-year period, you are going to have one or two that go from 20 to nothing. If you have more, it is bad.
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There is a considerable tendency for common stock investors to do the greater part of their buying, both of “good” and “bad” securities, at high levels of the market. They are equally inclined to do the greater part of their selling at low levels of the market, a procedure which is not conducive to successful results.
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You can’t imagine how many shrewd, experienced business men forget in Wall Street what it took them years to learn.
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Anything that helps make addicts out of occasional traders should be avoided as if it were the bubonic plague.
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I’m a very blocking and tackling kind of a thinker. I just try and avoid being stupid.
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When investors — individual and institutional alike — engage in far more trading –inevitably with one another — than is necessary for market efficiency and ample liquidity, they become, collectively, their own worst enemies.
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For social and sentimental reasons, people have a propensity to want to do really dumb things from time to time.
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Failure will give you a tattoo that will stay with you your whole life, and sometimes it’s a really good thing.
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When deciding to sell, people have control over whether to give themselves pleasure or give themselves pain, and they tend to give themselves pleasure. In other words, they tend to sell winners and hang on to losers. It turns out to be a bad idea.
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It turns out that when people have to sell a stock from their portfolio, they are not rational between winners and losers. People tend to sell winners and hang on to their losers. The psychology of that is quite straightforward.
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There are people that own electronic stocks that don’t know the difference between an EEPROM and the senior prom and they’re trying to buy stocks.
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People are very careful with their money. When they buy a refrigerator, they do some work. When they buy an apartment or rent an apartment, they’re careful. For some reason, when it comes to stocks, they just go coo-coo. They don’t do any work at all.
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The more decisions you make, the higher the chances are that you will make a poor decision.
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If I’ve made one mistake in the course of managing investments it was selling really good companies too soon. Because generally, if you’ve made good investments, they will last for a long time.
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I have made bad business decisions. You can’t live a successful life without doing some difficult things that go wrong. That’s just the nature of the game.
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The single most important thing, if you want to avoid a lot of stupid errors, is knowing where you’re competent and where you aren’t. Knowing the edge of your own competency. And that’s very hard to do because the human mind naturally tries to make you think you’re way smarter than you are.
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I’m constantly making mistakes where I can, in retrospect, realize that I should have decided differently. And I think that that is inevitable because it’s difficult to be a good investor.
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It may be a fair generalization to assert that the top levels of most “normal” bull markets are characterized by a tendency to equate stock risks with bond risks.
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The more irreversible the decisions, the more expensive the consequences of being wrong.
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To me, the primary task in investing is to test and then retest some more the parameters and paradigms that appear to govern daily events. Betting against them is dangerous when they look solid, but accepting them without question is the most dangerous step of all.
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Laws have been passed to outlaw some of the more egregious behavior which contributed to the big bull market of the twenties. Nothing has been done about the seminal lunacy which possesses people who see a chance of becoming rich.
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I do strongly urge that we be as cautious as ever in reposing too great confidence in men of great financial position.
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Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.
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More investment sins are probably committed by otherwise quite intelligent people because of “tax considerations” than from any other cause.
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I’m an optimist, both as a person and an investor. It’s a big mistake to be pessimistic as long as we have a viable civilization which is reasonably well managed.
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My stocks sometimes get overpriced, but in the long run this kind of company, if you can find it, will outperform the market and the economy. The worst thing you can do is try to catch the swings, sell out too soon and be afraid to buy back in.
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I really believe it’s better to learn from other people’s mistakes as much as possible.
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One of my life principles is that the only way you can live life is by dealing with what is, and not with what might have been. So that’s the way I’ve tried to deal with setbacks.
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It is true that you don’t go broke taking a profit, but that assumes you will make a profit on everything you do. It doesn’t allow for the mistakes you’re bound to make in the investment business.
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Being extremely early is tantamount to being wrong, so contrarians are well advised to develop an understanding of the psychology of the sellers.
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Investors must never mistake an investment that is down in price for one that is bargain-priced; undervaluation is determined only by a security’s price compared to its underlying value.
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Just because we think a stock is undervalued doesn’t mean we’re right. We may be wrong in our judgment.
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One of the things you learn in this business is humility because you see your mistakes the next day.
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You have to say to yourself, “If I’m right, how much am I going to make? If I’m wrong, how much am I going to lose?” That’s the risk/reward ratio.
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A lot of my stocks don’t work. The beauty of the stock market is that if you are wrong, if you put $1,000 up, all you lose is $1,000. I have proven that many times.
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In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.
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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 most important lesson an investor can learn is to be dispassionate when confronted by unexpected and unfavorable outcomes.
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If you’re lucky enough to have one golden egg in your portfolio, it may not matter if you have a couple of rotten ones in there with it.
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If a stock has gone sideways for a couple of years, and the fundamentals are decent, and you can find something new that’s positive in the company, then if you’re wrong, the stock will probably continue to go sideways, and you won’t lose a lot of money. But if you’re right, that stock is going north.
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One of the oldest sayings on Wall Street is “Let your winners run, and cut your losers.” It’s easy to make a mistake and do the opposite, pulling out the flowers and watering the weeds.
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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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Avoid long shots. I’ve bought about 30 long shots in my life. I’ve never broken even on one.
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I’ve thought a lot of things when I’m managing money with great, great conviction, and a lot of times I’m wrong. And when you’re betting the ranch and the circumstances change, you have to change, and that’s how I’ve always managed money.
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Diversification is a safety factor that is essential because we should be humble enough to admit we can be wrong.
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Through reluctance to sell, more than one investor has avoided the capital gains tax but lost the capital gain itself.
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I have this motto in life as well as in business, which is: every day, I’m lucky if I have learned something new and I’m doubly lucky if it hadn’t cost too much.
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I think it’s part of a life lived right that you learn how to make some lemonade out of your lemons.
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No method guarantees you’re not going to lose your shirt. I’ve done that many times. I’ve had stocks go from $11 to seven cents.
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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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They used to say about the Bourbons that they forgot nothing and they learned nothing, and I’ll say about the Wall Street people, typically, is that they learn nothing, and they forget everything.
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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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I have lost a lot of money in some bad savings and loans. I have lost money in bad banks. And I have lost money in electronics companies. It is very easy to lose money in the stock market.
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Every great money manager I’ve ever met, all they want to talk about is their mistakes. There’s a great humility there.
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Many mistakes have been made in buying growth stocks on the theory that the future will duplicate the past.
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Modern life creates successful bureaucracy and successful bureaucracy breeds failure and stupidity.
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My system in life is to figure out what’s really stupid and then avoid it. It doesn’t make me popular, but it prevents a lot of trouble.
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The mistake most people make is answering the door just because Mr. Market knocks. You don’t have to let him in.
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Most of the destruction of investment value occurs in small, private anguishing experiences that are never discussed and never recorded, because people were doing things they never should have done.
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It is a great mistake to refine the analysis of a single year’s showing to the last possible penny, in order to build from that some substantial idea of the value of the stock; because it cannot be found in the results for any given year no matter how accurately those results were stated.
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You’re going to make mistakes. If you’re terrific in this business you’re right six times out of 10.
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