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Be wary of highflying stocks from "summary" of The Intelligent Investor Rev Ed. by Benjamin Graham
One of the key principles that investors should keep in mind is the need to exercise caution when dealing with highflying stocks. These stocks, which have experienced a significant increase in price over a short period of time, may seem appealing to some investors due to the potential for quick profits. However, it is important to remember that such rapid price increases are often unsustainable and may be driven by speculative forces rather than underlying value. Investors who are drawn to highflying stocks should be aware of the risks involved. These stocks are often subject to greater volatility and may be more susceptible to sudden price declines. This can result in significant losses for investors who have purchased these stocks at inflated prices. In addition, the high valuations of these stocks may not be supported by the earnings or assets of the underlying companies, making them vulnerable to market corrections. It is important for investors to approach highflying stocks with a critical eye and to conduct thorough research before making any investment decisions. By carefully evaluating the fundamentals of the companies behind these stocks, investors can better assess whether the current price levels are justified and whether the potential for future growth is realistic. This can help investors avoid the pitfalls of investing in stocks that are trading at unsustainable levels and reduce the risk of significant losses.- While highflying stocks may seem enticing to some investors, it is important to approach them with caution and to be aware of the risks involved. By conducting thorough research and evaluating the fundamentals of the underlying companies, investors can make more informed decisions and avoid potential pitfalls in the market.
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