📖Benjamin Graham
Adequate Diversification
Diversify to protect against individual stock risk.
There is a close logical connection between the concept of a safety margin and the principle of diversification. Even with a margin in the investor's favor, an individual security may work out badly.
🏠 Everyday Analogy
📖 Core Interpretation
Benjamin Graham treats survival as the first objective. Limiting permanent capital loss, controlling leverage, and avoiding single-point failure are prerequisites for long-term compounding.
💎 Key Insight：Margin of safety and diversification are complementary protections.
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❓ Why It Matters
A single large drawdown can erase years of progress. Risk control is not timidity; it is the operating system that keeps compounding alive.
🎯 How to Practice
Define downside scenarios before entry, cap position size, avoid fragile leverage, and maintain liquidity so mistakes remain survivable.
⚠️ Common Pitfalls
Equating volatility with all forms of risk
Oversized positions without an exit plan
Using leverage to compensate for uncertainty
📚 Case Studies
1
Dot‑Com Bubble Peak (1999)
Investors piled into Internet stocks with no earnings, driven by fear of missing out and media hype.
✨ Outcome：Bubble burst in 2000; Nasdaq fell ~78%. Disciplined investors who avoided fads preserved capital and later bought quality firms cheaply.
2
Pre‑Crash Euphoria (1929)
An investor buys leading industrial stocks during the late‑1920s boom as prices detach from earnings.
✨ Outcome：Following the 1929 crash, portfolio loses over 70%. Investor who holds quality issues and reinvests dividends recovers much of value over the 1930s‑40s.
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