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Focus on intrinsic value, not market price from "summary" of The Intelligent Investor by Benjamin Graham
The intelligent investor must always focus on intrinsic value, not market price. This principle is paramount in achieving long-term success in the world of investing. Market prices are often unpredictable and can fluctuate wildly based on external factors such as market sentiment, economic conditions, or even rumors. These fluctuations can cause investors to make irrational decisions based on short-term market movements rather than the underlying value of the investment. Intrinsic value, on the other hand, is the true value of an investment based on its fundamental characteristics such as earnings, assets, growth potential, and management quality. By focusing on intrinsic value, investors can better assess the long-term potential of an investment and make informed decisions based on a thorough analysis of the underlying fundamentals. It is important for investors to remember that market price does not always reflect intrinsic value. In fact, market prices can often deviate significantly from intrinsic value, creating opportunities for savvy investors to buy undervalued securities or sell overvalued ones. By focusing on intrinsic value, investors can take advantage of these opportunities and potentially achieve superior returns over the long term. While it may be tempting to follow the crowd and invest based on market sentiment or momentum, the intelligent investor understands the importance of staying true to fundamental analysis and focusing on intrinsic value. By sticking to this principle, investors can avoid the pitfalls of market speculation and build a solid foundation for long-term success in the world of investing.
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