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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New financial products are typically created for sunny days and are almost never stress-tested for stormy weather.
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Risk is not inherent in an investment; it is always relative to the price paid.
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Nowhere does it say that investors should strive to make every last dollar of potential profit; consideration of risk must never take a backseat to return.
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You must always be prepared for the unexpected, including sudden, sharp downward swings in markets and the economy. Whatever adverse scenario you can contemplate, reality can be far worse.
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Money flows, in effect, can render fundamental analysis futile in the short run, even while creating a compelling longer-term opportunity.
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The point of investing, after all, is not to have a great story to tell; the point of investing is to make money with limited risk.
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The tendency of investors to follow the market’s momentum and bet on whatever has worked recently is accompanied by antipathy to whatever hasn’t.
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Being extremely early is tantamount to being wrong, so contrarians are well advised to develop an understanding of the psychology of the sellers.
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Investors must never mistake an investment that is down in price for one that is bargain-priced; undervaluation is determined only by a security’s price compared to its underlying value.
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We consider for each of our investments not only whether a security is undervalued but why it is undervalued. If the reason is that there are uninformed or emotional sellers, we become more comfortable.
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It is always easiest to run with the herd; at times, it can take a deep reservoir of courage and conviction to stand apart from it. Yet distancing yourself from the crowd is an essential component of long-term investment success.
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As an investor you never have perfect information, and the biggest profits are always available when competition and information are scarce.
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The payoff to fundamental analysis rises proportionately with the difficulty of performing it.
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In investing, nothing is certain. The best investments we have ever made, that in retrospect seem like free money, seemed not at all that way when we made them.
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It is not really within human nature to comprehend that you may not know everything you think you know, and, further, that what you believe in could change on a dime.
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Rather than own a little bit of everything, we have always tended to place our eggs in a few dozen baskets and watch them closely.
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It is only in a bear market that the value investing discipline becomes especially important because value investing, virtually alone among strategies, gives you exposure to the upside with limited downside risk.
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The main underlying principle of value investing is that you should invest in undervalued securities because they alone offer a margin of safety.
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Any contrarian knows that just as a grim present is usually precursor to a better future, a rosy present may be precursor to a bleaker tomorrow.
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People do not consciously choose to invest according to their emotions — they simply cannot help it.
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There is no salve for the hungry investor like the immediate positive reinforcement that comes from making money instantaneously.
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Value investors thrive not by incurring high risk (as financial theory would suggest), but by deliberately avoiding or hedging the risks they identify.
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