The (stock) market is there only as a reference point to see if anybody is offering to do anything foolish. When we invest in stocks, we invest in businesses.
Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the models. Beware of geeks bearing formulas.
But 300 million Americans, their lending institutions, their government, their media, all believed that house prices were going to go up consistently. And that got billed into a $20 trillion residential home market. Lending was done based on it, and everybody did a lot of foolish things.
The best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago.
Mark Zuckerberg will be a hero to many young entrepreneurs 20 years from now. Bill Gates will be a hero to others, and they will look to those [people] like I read books when I was in my teens about Rockefeller or Carnegie.
Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.
Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends.
There are three important principles to Graham's approach. [The first is to look at stocks as fractional shares of a business, which] gives you an entirely different view than most people who are in the market. [The second principle is the margin-of-safety concept, which] gives you the competitive advantage. [The third is having a true investor's attitude toward the stock market, which] if you have that attitude, you start out ahead of 99 percent of all the people who are operating in the stock market - it's an enormous advantage.