Nearly anyone with an interest in investing knows the name Warren Buffett, the “Oracle of Omaha,” who, along with his partner Charlie Munger, heads holding company and market juggernaut Berkshire Hathaway Inc.
Fans of Buffett know that before he became known as one of the most successful investors in history, he was a student of Benjamin Graham. Graham literally wrote the books (“Security Analysis” and “The Intelligent Investor”) on value investing, a method of buying stock in companies that are trading at a discount to their intrinsic value.
Many market mavens-in-the-making have chosen the path of coattail investing, a system of mimicking the investing style or matching the portfolio picks of movers & shakers like Buffett. While you may not have gotten to study under Graham at Columbia University as Buffett did, the wisdom laid out in the following quotes of Graham’s may serve as the CliffsNotes.
On Doing Your Homework
“As a rule of thumb, investors should spend the bulk of their time on the disclosures of the security under study, and they should spend significant time on the reports of competitors.”
On Riding the Waves of Market Volatility
“Abnormally good or abnormally bad conditions do not last forever.”
“The sillier the market’s behavior, the greater the opportunity for the businesslike investor.”
“Never buy a stock because it has gone up or sell one because it has gone down.”
“A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.”
Concerning Consensus Estimates
“When values are determined chiefly by the outlook, the resultant judgments are not subject to any mathematical controls and are almost inevitably carried to extremes.”
“Analysis is concerned primarily with values which are supported by the facts and not with those which depend largely upon expectations.”
‘Timing’ the Market Is a Fool’s Errand
“It is our view that stock-market timing cannot be done, with general success, unless the time to buy is related to an attractive price level, as measured by analytical standards.”
“In the short run the market is a voting machine, but in the long run it is a weighing machine.”
Resist the Urge to Act
“Thousands of people have tried, and the evidence is clear: The more you trade, the less you keep.”
“If fees consume more than 1 percent of your assets annually, you should probably shop for another adviser.”
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