Benjamin Graham Quotes - Page 5

The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price.

Most businesses change in character and quality over the years, sometimes for the better, perhaps more often for the worse. The investor need not watch his companies' performance like a hawk; but he should give it a good, hard look from time to time.

The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.

Although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go.

The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is cause for concern.

As in roulette, same is true of the stock trader, who will find that the expense of trading weights the dice heavily against him.

Speculators often prosper through ignorance; it is a cliché that in a roaring bull market knowledge is superfluous and experience is a handicap. But the typical experience of the speculator is one of temporary profit and ultimate loss

Evidently stockholders have forgotten more than to look at balance sheets. They have forgotten also that they are owners of a business and not merely owners of a quotation on the stock ticker. It is time, and high time, that the millions of American shareholders turned their eyes from the daily market reports long enough to give some attention to the enterprises themselves of which they are the proprietors, and which exist for their benefit and at their pleasure.

Undervaluations caused by neglect or prejudice may persist for an inconveniently long time, and the same applies to inflated prices caused by over-enthusiasm or artificial stimulants.

Even defensive portfolios should be changed from time to time, especially if the securities purchased have an apparently excessive advance and can be replaced by issues much more reasonable priced.

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of good business conditions. The purchasers view the good current earnings as equivalent to 'earning power' and assume that prosperity is equivalent to safety.

Confusing speculation with investment is always a mistake.

The chief obstacle to success lies in the stubborn fact that if the favorable prospects of a concern are clearly apparent they are almost always reflected already in the current price of the stock. Buying such an issue is like betting on a topheavy favorite in a horse race. The chances may be on your side, but the real odds are against you.

THERE is widespread agreement among economists that abuse of credit constitutes one of the chief unwholesome elements in business booms and is mainly responsible for the ensuing crash and depression.

The memory of the financial community is proverbially and distressingly short.

Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do. The demand being there, it must be supplied.

In nine companies out of ten the factor of fluctuation has been a more dominant and important consideration in the matter of investment than has the factor of long-term growth or decline

Speculative stock movements are carried too far in both directions, frequently in the general market and at all times in at least some of the individual issues.

For 99 issues out of 100 we could say that at some price they are cheap enough to buy and at some price they would be so dear that they would be sold.

The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances. He should always remember that market quotations are there for his convenience, either to be taken advantage of or to be ignored.

Even with a margin of safety in the investor's favor, an individual security may work out badly. For the margin guarantees only that he has a better chance for profit than for loss - not that loss is impossible. But as the number of such commitments is increased the more certain does it become that the aggregate of the profits will exceed the aggregate of the losses.

The determining trait of the enterprising (or active, or aggressive) investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than the average.

The art of investment has one characteristic that is not generally appreciated. A creditable, if unspectacular, result can be achieved by the lay investor with a minimum of effort and capability; but to improve this easily attainable standard requires much application and more than a trace of wisdom. If you merely try to bring just a little extra knowledge and cleverness to bear upon your investment program, instead of realizing a little better than normal results, you may well find that you have done worse.

Traditionally the investor has been the man with patience and the courage of his convictions who would buy when the harried or disheartened speculator was selling.

We have been trying to point out that this concept of an indefinitely favorable future is dangerous, even if it is true; because even if it is true you can easily overvalue the security, since you make it worth anything you want it to be worth. Beyond this, it is particularly dangerous too, because sometimes your ideas of the future turn out to be wrong. Then you have paid an awful lot for a future that isn't there. Your position then is pretty bad.