Quotes About Risk

High valuations entail high risks.

However, the risk of paying too high a price for good-quality stocks—while a real one—is not the chief hazard confronting the average buyer of securities. Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions. The purchasers view the current good earnings as equivalent to "earning power" and assume that prosperity is synonymous with safety.

Graham's definition of investing could not be clearer: "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return."1 Note

you must deliberately protect yourself against serious losses; you must aspire to "adequate," not extraordinary, performance.

By the time everyone decides that a given industry is "obviously" the best one to invest in, the prices of its stocks have been bid up so high that its future returns have nowhere to go but down.

Graham's guideline of owning between 10 and 30 stocks remains a good starting point for investors who want to pick their own stocks, but you must make sure that you are not overexposed to one industry.

The future value of every investment is a function of its present price. The higher the price you pay, the lower your return will be.

If you buy a stock purely because its price has been going up—instead of asking whether the underlying company's value is increasing—then sooner or later you will be extremely sorry. That's not a likelihood. It is a certainty.

There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are: (1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose.

Buying a bond only for its yield is like getting married only for the sex. If the thing that attracted you in the first place dries up, you'll find yourself asking, "What else is there?" When the answer is "Nothing," spouses and bondholders alike end up with broken hearts.

The intelligent investor realizes that stocks become more risky, not less, as their prices rise—and less risky, not more, as their prices fall.

Investment must always consider the price as well as the quality of the security.

Is the stock market riskier today than two years ago simply because prices are higher? The answer is no." But the answer is yes. It always has been. It always will be.

The individual investor should act consistently as an investor and not as a speculator

the intelligent investor designates a tiny portion of her total portfolio as a "mad money" account. For most of us, 10% of our overall wealth is the maximum permissible amount to put at speculative 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.

Do not enter upon an operation—

Cuando dejas todo al albur del azar, de repente tu suerte se agota. Pat Riley, entrenador de baloncesto

He would not be far wrong if this motto read more simply: Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop. p43

Growth stocks are worth buying when their prices are reasonable, but when their price/earnings ratios go much above 25 or 30 the odds get ugly:

You must never delude yourself into thinking that you're investing when you're speculating. Speculating becomes mortally dangerous the moment you begin to take it seriously. You must put strict limits on the amount you are willing to wager.

Because so few investors have the guts to cling to stocks in a falling market, Graham insists that everyone should keep a minimum of 25% in bonds. That cushion, he argues, will give you the courage to keep the rest of your money in stocks even when stocks stink.

In the financial markets, hindsight is forever 20/20, but foresight is legally blind.

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.

intelligent investor designates a tiny portion of her total portfolio as a "mad money" account. For most of us, 10% of our overall wealth is the maximum permissible amount to put at speculative 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.