There are two principal mistakes that nearly all amateurs in the stock market make. The first is to have an inexact knowledge of the securities in which one is dealing, to know too little about a company’s management, its earnings, and prospects for future growth. The second mistake is to trade beyond one’s financial resources, to try to run up a fortune on a shoestring.
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One could say that my whole career in Wall Street proved one long process of education in human nature.
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The strange fascination that the stock market exerts upon people has never ceased being a source of wonder to me.
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The stockholder wants both income and appreciation, but in general the more he gets of one the less he realizes of the other.
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All experienced investors know that earning power exerts a far more potent influence over stock prices than does property value.
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The worth of a business is measured not by what has been put into it, but by what can be taken out of it.
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Current earnings, future prospects, management, marketability are all factors more or less independent of assets which contribute their share to the intrinsic value.
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Historically, many companies that have had terrible times have come back, or many of them do. A decline doesn’t mean it’s the end.
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I think people trade too much, looking for short-term gains. But I don’t think you should hold stocks indefinitely.
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We live in a society that changes, so you can’t be too strict about the rules you had 40 or 50 years ago. You can’t buy stocks on the basis you did then.
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If you’re going to invest in stocks for the long term, or real estate, of course, there are going to be periods when there’s a lot of agony and other periods when there’s a boom. I think you just have to learn to live through them.
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The principle of “managed” investment trusts is absolutely sound, granted only one premise. The premise is that there are somewhere people of such experience and insight that they can predict with some sort of accuracy the future behavior of securities.
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As a science, I should say that chart reading shares a pedestal with astrology; but most chart readers have far too much education and mental discipline to consider astrology seriously.
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There has always been a considerable number of pathetic dopes who busy themselves examining the last thousand numbers which have appeared on a roulette wheel, in search of such a repeating pattern. Sadly enough, they have usually found it.
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People would rather believe that they have been robbed than that they have been fools on the advice of fools.
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Although expectations of the future are supposed to be the driving force in the capital markets, those expectations are almost totally dominated by memories of the past. Ideas, once accepted, die hard.
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A few holdings with radically different types of market behavior will do more to smooth out the pattern of portfolio returns than 50 or 100 holdings that move up and down together.
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If we take a long look at the performance of common stocks over recorded market history, we find that they have indeed been a good investment — providing, of course, that the investor has had a hundred years or so to play the market.
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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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Risk means the chance of being wrong — not always in an adverse direction, but always in a direction different from what we expected.
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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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Risk management means protecting oneself from the adverse and unexpected decisions others may make and, in the process, making better decisions than they do.
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