The beauty of periodic rebalancing is that it forces you to base your investing decisions on a simple, objective standard.
There is a close logical connection between the concept of a safety margin and the principle of diversification.
Price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal.
We are convinced that the intelligent investor can derive satisfactory results from pricing of either type (market timing or fundamental analysis via price). We are equally sure that if he places his emphasis on timing, in the sense of forecasting, he will end up as a speculator and with a speculator's financial results." And "The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices.
People who invest make money for themselves; people who speculate make money for their brokers. And that, in turn, is why Wall Street perennially downplays the durable virtues of investing and hypes the gaudy appeal of speculation.
A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.
Abnormally good or abnormally bad conditions do not last forever.
Intelligent investment is more a matter of mental approach than it is of technique. A sound mental approach toward stock fluctuations is the touchstone of all successful investment under present-day conditions.
Stock speculation is largely a matter of A trying to decide what B, C and D are likely to think-with B, C and D trying to do the same.
The investor is neither smart not richer when he buys in an advancing market and the market continues to rise. That is true even when he cashes in a goodly profit, unless either (a) he is definitely through with buying stocks an unlikely story or (b) he is determined to reinvest only at considerably lower levels. In a continuous program no market profit is fully realized until the later reinvestment has actually taken place, and the true measure of the trading profit is the difference between the previous selling level and the new buying level.
All the real money in investment will have to be made as most of it has been in the past not out of buying and selling but out of owning and holding securities, receiving interests and dividends therein, and benefiting from their long-term increases in value. Hence stockholder's major energies and wisdom as investors should be directed toward assuring themselves of the best operating results from their corporations. This in turn means assuring themselves of fully honest and competent managements.
The volume of credit depends upon three factors: the desire to borrow, the ability to lend and the desire to lend.
In the financial markets, hindsight is forever 20/20, but foresight is legally blind. And thus, for most investors, market timing is a practical and emotional impossibility.
Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.
To enjoy a reasonable chance for continued better than average results, the investor must follow policies which are (1) inherently sound and promising, and (2) not popular on Wall Street.
The story of Joseph in Egypt and of the seven fat and the seven lean years has passed into the homely wisdom of the ages; but our economic thinking seems to have lost contact with so simple and basic approach to prudent management of a nations welfare.
Even defensive portfolios should be changed from time to time, especially if the securities purchased have an apparently excessive advance and can be replaced by issues much more reasonable priced.
Obvious prospects for physical growth in a business do not translate into obvious profits for investors.
The chief obstacle to success lies in the stubborn fact that if the favorable prospects of a concern are clearly apparent they are almost always reflected already in the current price of the stock. Buying such an issue is like betting on a topheavy favorite in a horse race. The chances may be on your side, but the real odds are against you.
Speculative stock movements are carried too far in both directions, frequently in the general market and at all times in at least some of the individual issues.
In nine companies out of ten the factor of fluctuation has been a more dominant and important consideration in the matter of investment than has the factor of long-term growth or decline
Always remember that market quotations are there for convenience, either to be taken advantage of or to be ignored.
The memory of the financial community is proverbially and distressingly short.
you may take it as an axiom that you cannot profit in Wall Street by continuously doing the obvious or the popular thing
we have complaints that institutional dominance of the stock market has put 'the small investor at a disadvantage because he can't compete with the trust companies' huge resources, etc. The facts are quite the opposite. It may be that the institutions are better equipped than the individual to speculate in the market.But I am convinced that an individual investor with sound principles, and soundly advised, can do distinctly better over the long pull than large institutions.
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