Finance has its anatomy and its physiology. The former is studied through the medium of balance sheets, the latter through income statements.
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At its root, risk is about mystery. It focuses on the unknown, for there would be no such thing as risk if everything were known.
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Risk is about how we make decisions, and only incidentally about the math that we employ to reach those decisions.
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Risk is about dealing with problems to which there is no certain solution.
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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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Gold, much more so than any other commodity, is about sentiment and psychology.
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No stock picker knows so much that he can’t learn a trick or a tip from a peer.
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The harsh truth is that yesterday’s reinvention doesn’t mean as much as today’s execution and tomorrow’s competition. Just as old companies sometimes have to learn new tricks, new companies have to keep changing.
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Don’t buy “cheap” stocks just because they’re cheap. Buy them because the fundamentals are improving.
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Stocks do well for a reason and do poorly for a reason. Make sure you know the reasons.
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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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If your only reason for picking a stock is that an expert likes it, then what you really need is paid professional help.
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People worry about the riskiness of stocks, but bonds can be just as risky.
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If you don’t believe corporate profits will continue to rise, and you can’t stomach a decline in the market, don’t buy stocks or equity mutual funds.
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This is the way the capitalist ecology works. Industries decline, old companies wither away, and young companies rise up to replace them. This process is hard on many, but ultimately, it is healthy.
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A correction is a wonderful opportunity to buy your favorite companies at a bargain price.
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People who exit the stock market to avoid a decline are odds-on favorites to miss the next rally.
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If timing the market is such a great strategy, why haven’t we seen the names of any market timers at the top of the Forbes list of richest Americans?
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As long as people are willing to pay foolish prices for things, no plan is foolproof.
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