Beta and Modern Portfolio theory

Beta and modern portfolio theory and the like - none of it makes any sense to me.

- Charles Munger

What is risk

Risk comes from not knowing what you're doing.

- Warren Buffett

Inflation

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

- John Maynard Keynes

Keep it simple will do

Keep it simple and remember what you set out to do.

- Charles Munger

Be disciplined

We don't have to be smarter than the rest; we have to be more disciplined than the rest.

- Warren Buffett

It is an art, not a science

As I look back on it now, it's obvious that studying history and philosophy was much better preparation for the stock market than, say, studying statistics. Investing in stocks is an art, not a science, and people who've been trained to rigidly quantify everything have a big disadvantage. If stockpicking could be quantified, you could rent time on the nearest Cray computer and make a fortune. But it doesn't work that way. All the math you need in the stock market you get in the fourth grade.

- Peter Lynch

Two extreme behaviors of the market participants

While we were writing, we had to combat a widespread conviction that financial debacle was to be the permanent order; as we publish, we already see resurgent the age-old frailty of the investor-that his money burns a hole in his pocket. But it is the conservative investor who will need most of all to be reminded constantly of the lessons of 1931-1933 and of previous collapses. ... We have striven throughout to guard the student against overemphasis upon the superficial and the temporary. Twenty years of varied experience in Wall Street have taught the senior author that this overemphasis is at once the delusion and the nemesis of the world of finance.

- Preface to the First Edition of Security Analysis by Benjamin Graham & David L. Dodd.

The authors bring two extreme behaviors of the market participants in one sentence. During market collapses, people tend to extrapolate the severity and justify the permanency of what has already occurred. But market tends to ignore these opinion and bounce back even before people could realise it. Similarly, as the market rise up further and further, the investor loses his patience and jumps in into market. In both the situations, emotions would have overruled the investors logical investment decisions. The underlying cause in both the situations is to view the permanency of the current situation into the future. A conservative investor has to overcome this tendency and have to take logical decisions overcoming the emotions which are formed by what we see and read day in and out.