Gerald Loeb’s classic might as well be called The Battle for Investment Survival and other writings. The original was published in 1935.
Since then, it’s been revised so many times that it’s doubled in size. In the copy I read, the other writings made up half the book.
The writings are a collection of articles and lectures by Loeb that repeats his main points on investing and strays into a number of other topics — taxes, retirement, job advice, travel, architecture, and a recipe for ice cream soda. So because of that, I purposely left most of it out of the notes.
That said, Loeb is highly quotable, so here are a few lines that stood out:
The most important thing I have learned over the last 40 years in Wall Street is to realize how little everyone knows and how little I know.
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Human nature being what it is, a person buying a stock at the wrong time is very apt to double his error and sell it at the wrong time.
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Almost every stock at some time or another is over-valued or under-valued, and generally once in its history either grossly over-valued or at an extreme bargain price.
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Stocks ordinarily make their highs at the moment that the greatest number of people visualize the greatest possible value, and not necessarily at the moment when the highest earnings or highest dividends or highest values are actually achieved.
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Stocks make their lows at that time and point when the greatest number of active investors think the worst of them.
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But remember, life is a succession of cycles. Day and night. Hot and cold. Good times and bad. High prices and low. Dividends increased and dividends cut. So don’t expect your investments to be the exception to the rule.
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Emotions have no place in investment decisions. Trouble is, we all have them to a greater or lesser degree.
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For every example of a company that has compounded its growth by wise investment of its cash there are several that would have done better to pass their surplus on to their stockholders.
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It takes superior management to adapt to change. And it takes superior management to build worthy successors to follow in their footsteps.
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Bull markets are not generally recognized until they have run some distance. The great danger is that you are apt to be very cautious in the early stages and then throw caution to the wind when the market keeps going higher and your original opinion seems to be wrong.
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To make money in the stock market you have to either be ahead of the crowd or very sure they are going in the same direction for some time to come.
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Remember that stocks invariably become “undervalued” or “overvalued.” They overshoot their logical goals or levels.
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“Buy low, sell high” is one of those wonderful ideas which may work out well for those who can learn the ropes. It can be a rather expensive idea if it is just applied as a generalization.
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As in every other investment situation, market action never exactly coincides with realization. The average stock goes up on great expectations. Very often the rise is excessive. It frequently occurs well ahead of actualities. Sometimes the whole expectation is never realized.
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It is true that, strictly speaking, short-term trading is speculative. But so is all intelligent investing.
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Your best weapons against the forces that tend to clip your fortune are knowledge and experience.
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It is my contention that none of us know what is going to happen to any stock regardless of quality or history.
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It is human nature to feel optimistic and confident when prices go up. When prices go down people begin to question whether they were correct in buying in the first place.
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I feel that investing is a very inexact science or no science at all. I think it can only be successfully done by feeling your way along, cutting short losses, concentrating on the profitable situations and certainly, above all, avoiding being locked into an inflexible long-term program.
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If you don’t feel confident enough to invest a sum that is important to you, better look for something else.
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Following trends is easier than trying to call turns in them.
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Limiting losses is like paying worthwhile insurance premiums. The novice can limit his losses mathematically. The expert will have his reasons. The fool will let them run.
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The next time you think you see a bargain, take it as a red signal to look further and see if you have missed an important weakness.
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Making a commitment is many times easier than closing one.
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It is the expectation of coming events, rather than the events when they materialize, that moves markets.
Source:
The Battle for Investment Survival
Last Call
- Insights on VC Pricing: Lessons from Uber, WeWorks, and Peloton! – Musings on Markets
- Poker is a Powerful Learning Tool – M. Konnikova
- Fat, Happy, And In Over Your Head – M. Housel
- The Virtuous Investor: Ignore the Judgment of Others – Klement on Investing
- One Simple Trick That Will Help You Invest Better – Morningstar
- A Taxonomy of Moats – Reaction Wheel
- Peter Lynch Q&A: Lessons from an Investing Legend – Fidelity
- A Final Message from T. Boone Pickens – TB Pickens
- Mohnish Pabrai: Meet the Author Interview (video) – MOI Global
- The Case for Being a Multi-Hyphenate – R. Holiday
- Animation Is Eating The World – M. Dempsey