Buy only what you understand, believe in, and intend to stick with — even when others are chasing the next miracle.
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Most people who have been really successful in the securities markets say the same thing — that they’re not smart enough to get into the market and out of it. So they tend to remain more or less in the market at all times.
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I don’t want to spend my time trying to earn a lot of little profits. I want very, very big profits that I’m ready to wait for.
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It is just appalling the nerve strain people put themselves under trying to buy something today and sell it tomorrow. It’s a small-win proposition. If you are a truly long-range investor, of which I am practically a vanishing breed, the profits are so tremendously greater.
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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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I know plenty of guys who consider themselves to be long-term investors but who are still perfectly happy to trade in and out and back into their favorite stocks.
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You want to design a portfolio that will make the members of a household as happy as possible, but the problem is that people aren’t very good at anticipating how they’re going to react to various market outcomes.
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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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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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Avoiding round trips and short-term devastation enables you to be around for the long term.
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The prevailing view has been that the market will earn a high rate of return if the holding period is long enough, but entry point is what really matters.
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I am much more inclined to buy a stock that has been kicked out of an index because then it may have value characteristics — it has underperformed.
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The line I draw in the sand is that if an asset has cash flow or the likelihood of cash flow in the near term and is not purely dependent on what a future buyer might pay, then it’s an investment. If an asset’s value is totally dependent on the amount a future buyer might pay, then its purchase is speculation.
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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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A cheap stock can stay cheap forever, but if you own a bankrupt bond, the process of emerging from bankruptcy and distributing new securities offers a practical catalyst to realize the value.
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When the markets are fairly ebullient, investors tend to hold the least objectionable securities rather than the truly significant bargains.
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Investing is buying a fractional interest in a business and buying debt claims on a business.
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The laws of probabilities tell us that almost anyone can achieve phenomenal success over any given measurement period. It is the task of those evaluating a money manager to ascertain how much of past success is due to luck and how much to skill.
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The question we ask ourselves is, ”What would we be willing to pay to own a security forever?” Then we determine whether we can buy it at a discount from that figure.
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We try to buy dollars for 50 cents, and to realize the dollar before too much time passes.
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Human nature being what it is, small loopholes are likely to be exploited until they become big ones, and big ones until they turn into financial disasters.
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If the stock market has a period of outperformance of its long-term return, it is inevitably followed by some period of underperformance. But people being optimistic and greedy by nature take the recent short-term outperformance of stocks as a sign of good things to come, rather than a warning of bad things to come.
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In my experience, large increases in assets under management adversely affect returns.
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People always want to believe that this time is different, that there’s something new under the sun, and that through their own ingenuity they can wish away risk.
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