It just seems logical that sticking to investing in only a small number of companies that you understand well, rather than moving down the list to your thirtieth or fiftieth favorite pick, would create a much greater potential to earn above-average investment returns.
Joel GreenblattOver the long term, despite significant drops from time to time, stocks (especially an intelligently selected stock portfolio) will be one of your best investment options. The trick is to GET to the long term. Think in terms of 5 years, 10 years and longer. Do your planning and asset allocation ahead of time. Choose a portion of your assets to invest in the stock market - and stick with it! Yes, the bad times will come, but over the truly long term, the good times will win out - and I hope the lessons from 2008 will help get you there to enjoy them.
Joel GreenblattSo one way to create an attractive risk/reward situation is to limit downside risk severely by investing in situations that have a large margin of safety. The upside, while still difficult to quantify, will usually take care of itself. In other words, look down, not up, when making your initial investment decision. If you donโt lose money, most of the remaining alternatives are good ones.
Joel GreenblattThereโs a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions. You canโt be a good value investor without being an independent thinker โ youโre seeing valuations that the market is not appreciating. But itโs critical that you understand why the market isnโt seeing the value you do. The back and forth that goes on in the investment process helps you get at that.
Joel Greenblatt