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Quotes on Risk Management

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Quote Authors

Benjamin Graham, Bernard Baruch, Charles Ellis, Charlie Munger, Chuck Akre, Daniel Kahneman, David Abrams, Dean Williams, Edward Thorp, Edwin Lefevre, Fred Schwed Jr, Henry Singleton, Hetty Green, Howard Marks, Joel Greenblatt, John Bogle, John Kenneth Galbraith, John Maynard Keynes, John Stuart Mill, John Templeton, Meir Statman, Myron Scholes, Peter Bernstein, Peter Lynch, Philip Carret, Philip Fisher, Richard Thaler, Robert Shiller, Seth Klarman, Stanley Druckenmiller, Walter Schloss, Warren Buffett,

“
I don’t think the objective of investment should ever be to take a risk in order to get a return. I think the objective of shrewd investment should be to find opportunities which offer a larger return than the average, combined with adequate safety.
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Benjamin Graham
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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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Peter Bernstein
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The tour we've taken through the last century proves that market irrationality of an extreme kind periodically erupts -- and compellingly suggests that investors wanting to do well had better learn how to deal with the next outbreak.
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Warren Buffett
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If you quantify, you won't necessarily rise to brilliance, but neither will you sink to craziness.
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Warren Buffett
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If you risk something that is important to you for something that is unimportant to you it just doesn't make sense.
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Warren Buffett
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Many years ago, an older partner taught me to distinguish between outcomes that are unlikely and outcomes that are catastrophic. The latter are to be avoided even if the odds on them are tiny.
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Peter Bernstein
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In the end, risk management is about consequences.
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Peter Bernstein
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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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John Bogle
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Investors need to pick their poison: Either make more money when times are good and have a really ugly year every so often, or protect on the downside and don’t be at the party so long when things are good.
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Seth Klarman
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Avoiding round trips and short-term devastation enables you to be around for the long term.
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Seth Klarman
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We try to protect against tail risk: the risk of unlikely but possible events that could be catastrophic.
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Seth Klarman
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The way I would think about risk aversion is most people would not want to toss a coin for their entire net worth.
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Seth Klarman
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It is crucial to have a strategy in place before problems hit, precisely because no one can accurately predict the future direction of the stock market or economy.
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Seth Klarman
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The best investors do not target return; they focus first on risk, and only then decide whether the projected return justifies taking each particular risk.
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Seth Klarman
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Nowhere does it say that investors should strive to make every last dollar of potential profit; consideration of risk must never take a backseat to return.
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Seth Klarman
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You must always be prepared for the unexpected, including sudden, sharp downward swings in markets and the economy. Whatever adverse scenario you can contemplate, reality can be far worse.
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Seth Klarman
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It is only in a bear market that the value investing discipline becomes especially important because value investing, virtually alone among strategies, gives you exposure to the upside with limited downside risk.
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Seth Klarman
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Value investors thrive not by incurring high risk (as financial theory would suggest), but by deliberately avoiding or hedging the risks they identify.
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Seth Klarman
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Higher risk investments often erode one's capital and produce lower returns -- the worst of all investment worlds. Higher-returns-for-higher-risks only applies on average and over time.
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Seth Klarman
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The problem in investing, I think, is timing. You may be right. But in the long run, we're all dead. Even if you're right, if it takes 20 years to work out, it can be a disaster.
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Walter Schloss
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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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Peter Lynch
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Diversification of risk matters not just defensively, but because it maximizes returns as well, because we expose ourselves to all of the opportunities that there may be out there.
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Peter Bernstein
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Survival as an investor over that famous long course depends from the very first on recognition that we do not know what is going to happen. We can speculate or calculate or estimate, but we can never be certain.
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Peter Bernstein
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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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Peter Bernstein
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At times of shock, converting illiquid assets to cash to build flexibility is very expensive. Finding an umbrella in a rain storm might be impossible or very costly.
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Myron Scholes
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There's no asset so good that it can't be overpriced and become a bad investment, and very few assets are so bad they can't be underpriced and be a good investment.
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Howard Marks
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I spend a great deal of my personal time trying to figure out one thing, which is, at a given point in time, how should you balance aggressiveness and defensiveness in your portfolio.
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Howard Marks
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Investment survival has to be achieved in the short run, not on average in the long run.
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Howard Marks
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Let us define the speculator as one who seeks to profit from market movements, without primary regard to intrinsic values; the "prudent stock investor" as one who (a) buys only at prices amply supported by underlying value, and (b) who determinedly reduces his stock holdings when the market enters the speculative phase of a sustained advance.
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Benjamin Graham
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The only significance of stock market gyrations to the true investor is that they give him an opportunity to buy good common stocks when they are cheap -- or at least reasonably priced -- and at times offer him an invitation to sell out at temptingly high levels.
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Benjamin Graham
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A hot stock, like a hot stove, should be handled with care.
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Benjamin Graham
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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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Benjamin Graham
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“
Let us define the speculator as one who seeks to profit from market movements, without primary regard to intrinsic value; the prudent stock investor as one who (a) buys only at prices amply supported by underlying value, and (b) who determinedly reduces his stock holdings when the market enters the speculative phase of a sustained advance.
”

Benjamin Graham
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The future, as I see it, is something to be protected against rather than to exploit.
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Benjamin Graham
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Risk-taking is an inevitable ingredient in investing, and in life, but never take a risk you do not have to take.
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Peter Bernstein
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I view diversification not only as a survival strategy but as an aggressive strategy, because the next windfall might come from a surprising place.
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Peter Bernstein
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Survival is the only road to riches.
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Peter Bernstein
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The greatest risks are the risks that we don't see and the most difficult problem is in preparing in advance for that kind of thing.
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Peter Bernstein
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The trick in risk management is in recognizing that normal is not a state of nature, but a state of transition and that trend is not destiny.
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Peter Bernstein
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One of the tricks of this business is, keep your losses down and then, if you have a few good breaks, the compounding works well for you.
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Walter Schloss
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We would rather underperform in a huge bull market than get clobbered in a really bad bear market.
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Seth Klarman
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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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Robert Shiller
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Beating the market by losing less than the market isn't that comforting.
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Joel Greenblatt
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The first and foremost responsibility of every investor is preservation of capital.
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Seth Klarman
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Whenever we consider an investment, we think just as much or more about what can go wrong as about what can go right, and we put the avoidance of losses on a high pedestal.
”

Howard Marks
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The point is to consider risk control, loss avoidance, at least as important as return.
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Howard Marks
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