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“Those who do not remember the past are condemned to repeat it.”
For indeed, the investor’s chief problem—and even his worst enemy—is likely to be himself.
“Obvious prospects for physical growth in a business do not translate into obvious profits for investors.”
The intelligent investor dreads a bull market, since it makes stocks more costly to buy.
risk. Never mingle the money in your speculative account with what’s in your investment accounts; never allow your speculative thinking to spill over into your investing activities; and never put more than 10% of your assets into your mad money account, no matter what happens.
Vanguard REIT Index Fund; other relatively low-cost choices include Cohen & Steers Realty Shares, Columbia Real Estate Equity Fund, and Fidelity Real Estate Investment Fund.
The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bring to bear on his task.
www.publicdebt.treas.gov. (For more on inflation-protected TIPS,
Human felicity is produc’d not so much by great Pieces of good Fortune that seldom happen, as by little Advantages that occur every day.
The Relatively Unpopular Large Company
The key requirement here is that the enterprising investor concentrate on the larger companies that are going through a period of unpopularity.
The happiness of those who want to be popular depends on others; the happiness of those who seek pleasure fluctuates with moods outside their control; but the happiness of the wise grows out of their own free acts.
your brokerage costs, by trading rarely, patiently, and cheaply your ownership costs, by refusing to buy mutual funds with excessive annual expenses your expectations, by using realism, not fantasy, to forecast your returns7 your risk, by deciding how much of your total assets to put at hazard in the stock market, by diversifying, and by rebalancing your tax bills, by holding stocks for at least one year and, whenever possible, for at least five years, to lower your capital-gains liability and, most of all, your own behavior.
The challenge for the intelligent investor is not to find the stocks that will go up the most and down the least, but rather to prevent yourself from being your own worst enemy
In 1999, Money Magazine asked more than 500 people whether their portfolios had beaten the market. One in four said yes. When asked to specify their returns, however, 80% of those investors reported gains lower than the market’s. (Four percent had no idea how much their portfolios rose—but were sure they had beaten the market anyway!) A Swedish study asked drivers who had been in severe car crashes to rate their own skills behind the wheel. These people—including some the police had found responsible for the accidents and others who had been so badly injured that they answered the survey from
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A business has customers; a professional person or organization has clients.
Getting to Know You
Value = Current (Normal) Earnings × (8.5 plus twice the expected annual growth rate)
the company’s “general long-term prospects” the quality of its management its financial strength and capital structure its dividend record and its current dividend rate.
Any established company that reprices options—as dozens of high-tech firms have—is a disgrace. And any investor who buys stock in such a company is a sheep begging to be sheared.
1. Adequate Size of the Enterprise All our minimum figures must be arbitrary and especially in the matter of size required. Our idea is to exclude small companies which may be subject to more than average vicissitudes especially in the industrial field. (There are often good possibilities in such enterprises but we do not consider them suited to the needs of the defensive investor.) Let us use round amounts: not less than $100 million of annual sales for an industrial company and, not less than $50 million of total assets for a public utility. 2. A Sufficiently Strong Financial Condition For
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current price divided by average earnings over the past three years.
“well-calibrated confidence” (do I understand this investment as well as I think I do?) “correctly-anticipated regret” (how will I react if my analysis turns out to be wrong?).
“risk is brewed from an equal dose of two ingredients—probabilities and consequences.”
Suppose you act as though God is and [you] lead a life of virtue and abstinence, when in fact there is no god. You will have passed up some goodies in life, but there will be rewards as well. Now suppose you act as though God is not and spend a life of sin, selfishness, and lust when in fact God is. You may have had fun and thrills during the relatively brief duration of your lifetime, but when the day of judgment rolls around you are in big trouble.
You must also ensure against loss if your analysis turns out to be wrong—
