Benjamin Graham Quotes - Page 3

By developing your discipline and courage, you can refuse to let other people's mood swings govern your financial destiny. In the end, how your investments behave is much less important than how you behave.

An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.

Though business conditions may change, corporations and securities may change, and financial institutions and regulations may change, human nature remains the same. Thus the important and difficult part of sound investment, which hinges upon the investor's own temperament and attitude, is not much affected by the passing years.

No matter how careful you are, the one risk no investor can ever eliminate is the risk of being wrong. Only by insisting on what Graham called the "margin of safety" - never overpaying, no matter how exciting an investment seems to be - can you minimize your odds of error.

The investor's primary interest lies in acquiring and holding suitable securities at suitable prices.

Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed.

It is no difficult trick to bring a great deal of energy, study, and native ability into Wall Street and to end up with losses instead of profits. These virtues, if channeled in the wrong directions, become indistinguishable from handicaps.

It is absurd to think that the general public can ever make money out of market forecasts.

We have not known a single person who has consistently or lastingly make money by thus "following the market". We do not hesitate to declare this approach is as fallacious as it is popular.

The investor is neither smart not richer when he buys in an advancing market and the market continues to rise. That is true even when he cashes in a goodly profit, unless either (a) he is definitely through with buying stocks an unlikely story or (b) he is determined to reinvest only at considerably lower levels. In a continuous program no market profit is fully realized until the later reinvestment has actually taken place, and the true measure of the trading profit is the difference between the previous selling level and the new buying level.

High valuations entail high risks.

Mr. Market does not always price stocks the way an appraiser or a private buyer would value a business. Instead, when stocks are going up, he happily pays more than their objective value; and, when they are going down, he is desperate to dump them for less than their true worth.

The genuine investor in common stocks does not need a great equipment of brain and knowledge, but he does need some unusual qualities of character

The reader can test his own psychology by asking himself whether he would consider, in retrospect, the selling at 156 in 1925 and buying back at 109 in 1931 was a satisfactory operation. Some may think that an intelligent investor should have been able to sell out much closer to the high of 381 and to buy back nearer the low of 41. If that is your own view you are probably a speculator at heart and will have trouble keeping to true investment precepts while the market rushes up and down.

Abnormally good or abnormally bad conditions do not last forever.

No statement is more true and better applicable to Wall Street than the famous warning of Santayana: "Those who do not remember the past are condemned to repeat it".

Unusually rapid growth cannot keep up forever; when a company has already registered a brilliant expansion, its very increase in size makes a repetition of its achievement more difficult.

In security analysis the prime stress is laid upon protection against untoward events. We obtain this protection by insisting upon margins of safety, or values well in excess of the price paid.

Experience teaches that the time to buy stocks is when their price is unduly depressed by temporary adversity. In other words, they should be bought on a bargain basis or not at all.

The stock market resembles a huge laundry in which institutions take in large blocks of each others washing ... without rhyme or reason.

A speculator gambles that a stock will go up in price because somebody else will pay even more for it.

The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future.

Whenever the investor sold out in an upswing as soon as the top level of the previous well-recognized bull market was reached, he had a chance in the next bear market to buy back at one third (or better) below his selling price.

The purchase of a bargain issue presupposes that the market's current appraisal is wrong, or at least that the buyer's idea of value is more likely to be right than the market's. In this process the investor sets his judgement against that of the market. To some this may seem arrogant or foolhardy.

The beauty of periodic rebalancing is that it forces you to base your investing decisions on a simple, objective standard.