I know that stocks represent fractional ownership in businesses and that, over time, the stock market will reflect their true intrinsic values. And crises bring worries and fears that make many investors forget that simple fact.
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I learned from great investors like Warren Buffett and Peter Lynch that you have to look at stocks not based on world events or economic data but almost in spite of them.
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Establishing and maintaining an unconventional investment profile requires acceptance of uncomfortably idiosyncratic portfolios which frequently appear downright imprudent in the eyes of conventional wisdom.
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Memory – and the resulting prudence – always comes out the loser when pitted against greed.
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Pro-cyclical behavior is one of the greatest and one of the most frequent mistakes.
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When most people think about the future, they ignore that the future is a distribution of possibilities.
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One of the important factors behind the fluctuation between bull and bear markets, between booms and crashes and bubbles, is that investor memory has to fail us – and fail universally – in order for the extremes to be reached.
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The pendulum of investment psychology is constantly fluctuating between optimism and pessimism, between greed and fear, between credulousness and skepticism, between risk tolerance and risk aversion.
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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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I believe denying clients the ability to be hyper-traders is doing them a favor. Most people are not adept enough to take advantage of short-term mis-valuations, and I put myself in that category.
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Waiting patiently is an essential part of being an investor. And when you do take action, do it dynamically, forcefully.
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I believe it is highly possible to improve your long-term results by adjusting your investment position at the extremes of the cycle. Not that often. But at the extremes.
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I don’t write to make investing easy. I write to show how hard it is so that people won’t try tricks that they can’t do.
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To be a great investor, you must have an approach, and you have to stick to it, despite the times when it’s not working.
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One of the astute things I was taught is that on average, the average investor does average before fees, and below average after fees.
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Smart investing doesn’t consist of buying good assets, but of buying assets well.
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Investing performance is what happens when events collide with an existing portfolio.
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The important thing to remember about investing is that it is not sufficient to set up a portfolio that will survive on average. The key is to survive at the low ends.
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No investment vehicle should offer more liquidity than is afforded by the underlying assets.
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For some reason, because of the way investor psychology works, people switch from only seeing the good to seeing only the bad.
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