Friday, 6 August 2010

The Prevalent Approach to Investing Often Does Not Work

The prevalent approach to investing is first to choose the best industry, and then to invest in the best company in that industry, regardless of the stock's price. 

Graham did not think well of this approach because he believed it was too unreliable. Good business does not always translate into good investment returns, and even the experts have difficulty selecting and concentrating on those issues which will become winners. Finally, the application of this method may place an investor in popular, overvalued stocks.

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