I got three ideas out of Ben’s book that have been the cornerstone of everything I’ve done, which are to look at stocks as part of a business rather than simply little things that go up and down. And then I took to heart his Mr. Market saga, which I think is vital to having the right attitude toward market fluctuations. Then third, the margin of safety.
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The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability — the reasoned probability — of that investment causing its owner a loss of purchasing power over his contemplated holding period.
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By owning great companies, you can just forget about all the noise and the irrational market fluctuations. And slowly get rich.
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The reason commodity prices are so volatile is that they are commodities, economically undistinguishable items except for price.
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We like a reasonable amount of volatility. In our business we want some action.
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It has been well and correctly remarked that the only things that go up in credit crisis and financial panic are correlations and volatility.
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Financial markets are inherently unstable; stability can be maintained only if it is made an objective of public policy. Moreover, instability is cumulative.
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You have to learn to profit from market fluctuations rather than suffer from them.
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Volatility is often a symptom of risk but is not a risk in and of itself. Volatility obscures the future but does not necessarily determine the future.
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It is not the market that is rising or falling at any moment, even if we commonly speak as though it were. In truth, prices move in response to the buying and selling decisions of countless investors, who are constantly considering the likely decisions of countless others.
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Quotations fluctuate constantly, reacting often illogically to all sorts of temporary and even trivial influences.
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The goal is to make good returns with less risk. Risk is not the same as volatility. It’s very hard to measure risk.
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People, it turns out, are not that averse to risk. For many reasons, they are not opposed to risk, but they are opposed to losing and the possibility of loss plays a very significant part in their decision.
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Volatility matters, because it defines the uncertainty of the price at which an asset will be liquidated.
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The availability of a quotation for your business interest (stock) should always be an asset to be utilized if desired. If it gets silly enough in either direction, you take advantage of it. Its availability should never be turned into a liability whereby its periodic aberrations, in turn, formulate your judgments.
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I am willing to trade the pains (forget about the pleasures) of substantial short term variance in exchange for maximization of long term performance. However, I am not willing to incur risk of substantial permanent capital loss in seeking to better long term performance.
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Market prices for stocks fluctuate at great amplitudes around intrinsic value but, over the long term, intrinsic value is virtually always reflected at some point in market price.
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Prices change when events are different from what the market has expected them to be.
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If you think of the stock market as a cauldron of minestrone soup that occasionally somebody sticks a ladle in and stirs up, it takes a while before all the vegetables float back to the level that they were at before.
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Volatility is not risk. And historic volatility does not necessarily project future volatility.
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The daily blips of the market are, in fact, noise — noise that is very difficult for most investors to tune out.
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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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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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One point movements may be likened to the ripples of the stock market, whose occurrence may be influenced by so great a multitude of factors that it is impossible to forecast them. Ten-point movements may perhaps be compared to waves.
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Long-term bonds can be almost as volatile as stocks. They have their own corrections.
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It’s worth reminding ourselves from time to time that gyrations in a stock price may tell us absolutely nothing about the prospects of the company involved.
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No one can predict with any certainty which way the next 1,000 points will be. Market fluctuations, while no means comfortable, are normal.
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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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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 think that the business about volatility being risk is a con job which was perpetrated primarily because volatility is machinable.
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The problem is not whether price changes should be disregarded — because clearly they should not be — but rather in what way can the investor and the security analyst deal intelligently with the price changes which take place.
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Real investment risk is measured not by the percent that a stock may decline in price in relation to the general market in a given period, but by the danger of a loss of quality and earning power through economic changes or deterioration in management.
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The idea of measuring investment risks by price fluctuations is repugnant to me, for the very reason that it confuses what the stock market says with what actually happens to the owners’ stake in the business.
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The higher the quality of a company the more inescapable is the speculative component in its price, and the more subject it is to wide price variations.
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The obvious fact about security prices to any student of the market is that they fluctuate.
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I don’t think volatility is an altogether irrelevant proxy for risk, even though, to a cool, dispassionate investor with a long-term time horizon, volatility is wonderful.
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I would like to see more volatility in the markets. Small shocks remind us that a bigger shock might occur. And, we protect ourselves to some extent.
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