Benjamin Graham Quotations | Page 2

Both a priori reasoning and experience teach us that as as these funds grow larger the geometrical rate of growth by compound interest ultimately defeats itself.

The modern world is not geared properly to the storage of goods.

The story of Joseph in Egypt and of the seven fat and the seven lean years has passed into the homely wisdom of the ages; but our economic thinking seems to have lost contact with so simple and basic approach to prudent management of a nations welfare.

Many progressive economists insist that gold is now in essentially the same position as silver and that the arguments the simon-pure gold advocates use against the white metal can be directed with equal effect against their own fetish.

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 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.

All the real money in investment will have to be made as most of it has been in the past not out of buying and selling but out of owning and holding securities, receiving interests and dividends therein, and benefiting from their long-term increases in value. Hence stockholder's major energies and wisdom as investors should be directed toward assuring themselves of the best operating results from their corporations. This in turn means assuring themselves of fully honest and competent managements.

The investor has a right to expect good results to flow from a consistent and courageous application of the principle of buying after the market has declined substantially and selling after it has had a spectacular rise. But he cannot expect to reduce this principle to a simple and foolproof formula, with profits guaranteed and no anxious periods.

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.

It is worth pointing out that assuredly not more than one person out of a hundred who stayed in the market after after 1925 emerged from it with a net profit and that the speculative losses taken were appalling.

The world has not learned the technique of balanced expansion without the resultant commercial and financial congestion.

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

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.

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.

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

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.

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.

Before you place your financial future in the hands of an adviser, it's imperative that you find someone who not only makes you comfortable but whose honesty is beyond reproach.

If fees consume more than 1% of your assets annually, you should probably shop for another adviser.

The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.

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

The only thing you should do with pro forma earnings is ignore them.

High valuations entail high risks.

A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.

You must never delude yourself into thinking that you're investing when you're speculating.

Stocks can be dynamite.

Do not let anyone else run your business

The history of the past fifty years, and longer, indicates that a diversified holding of representative common stocks will prove more profitable over a stretch of years than a bond portfolio, with one important provisio that the shares must be purchased at reasonable market levels, that is, levels that are reasonable in the light of fairly well-defined standards derived from past experience.

Nothing in finance is more fatuous and harmful, in our opinion, than the firmly established attitude of common stock investors regarding questions of corporate management. That attitude is summed up in the phrase: "If you don't like the management, sell your stock." [...] The public owners seem to have abdicated all claim to control over the paid superintendents of their property

Intelligent investment is more a matter of mental approach than it is of technique. A sound mental approach toward stock fluctuations is the touchstone of all successful investment under present-day conditions.

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.

The best way to measure your investing success is not by whether you're beating the market but by whether you've put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.

A price decline is of no real importance to the bona fide investor unless it is either very substantial say, more than a third from cost or unless it reflects a known deterioration of consequence in the company's position. In a well-defined bear market many sound common stocks sell temporarily at extraordinary low prices. It is possible that the investor may then have a paper loss of fully 50 per cent on some of his holdings, without any convincing indication that the underlying values have been permanently affected.

If General Motors is worth $60 a share to an investor it must be because the full common-stock ownership of this gigantic enterprise as a whole is worth 43 million (shares) times $60, or no less than $2,600 million.

The investor has the benefit of the stock market's daily and changing appraisal of his holdings, for whatever that appraisal may be worth , and, second, that the investor is able to increase or decrease his investment at the market's daily figure if he chooses . Thus the existence of a quoted market gives the investor certain options which he does not have if his security is unquoted. But it does not impose the current quotation on an investor who prefers to take his idea of value from some other source.

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.

Wall Street has a few prudent principles; the trouble is that they are always forgotten when they are most needed.

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.

Mathematics is ordinarily considered as producing precise and dependable results; but in the stock market the more elaborate and abstruse the mathematics the more uncertain and speculative are the conclusions we draw there from. Whenever calculus is brought in, or higher algebra, you could take it as a warning that the operator was trying to substitute theory for experience, and usually also to give to speculation the deceptive guise of investment.

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

Always remember that market quotations are there for convenience, either to be taken advantage of or to be ignored.

Buy when most people, including experts, are pessimistic, and sell when they are actively optimistic,

The investor's chief problem - and even his worst enemy - is likely to be himself.

I quickly convinced myself that the true key to material happiness lay in a modest standard of living which could be achieved with little difficulty under almost all economic conditions.

The intelligent investor is likely to need considerable will power to keep from following the crowd.

Obvious prospects for physical growth in a business do not translate into obvious profits for investors.

Diversification is an established tenet of conservative investment.

In most cases the favorable price performance will be accompanied by a well-defined improvement in the average earnings, in the dividend, and in the balance-sheet position. Thus in the long run the market test and the ordinary business test of a successful equity commitment tend to be largely identical.

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

Those with the enterprise lack the money and those with the money lack the enterprise to buy stocks when they are cheap.

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

Before you invest, you must ensure that you have realistically assessed your probability of being right and how you will react to the consequences of being wrong.

Stock speculation is largely a matter of A trying to decide what B, C and D are likely to think-with B, C and D trying to do the same.

Price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal.

The intelligent investor gets interested in big growth stocks not when they are at their most popular - but when something goes wrong.

The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists.

The intelligent investor shouldn't ignore Mr. Market entirely. Instead, you should do business with him- but only to the extent that it serves your interests.

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.

A great company is not a great investment if you pay too much for the stock.

The intelligent investor is a realist who sells to optimists and buys from pessimists.

We define a bargain issue as one which, on the basis of facts established by analysis, appears to be worth considerably more that it is selling for.

The utility, or intrinsic value of gold as a commodity is now considerably less than in the past; its monetary status has become extraordinarily ambiguous; and its future is highly uncertain.

In the short-run, the market is a voting machine - reflecting a voter-registration test that requires only money, not intelligence or emotional stability - but in the long- run, the market is a weighing machine.

Thousands of people have tried, and the evidence is clear: The more you trade, the less you keep.

Never buy a stock because it has gone up or sell one because it has gone down.

you may take it as an axiom that you cannot profit in Wall Street by continuously doing the obvious or the popular thing

The market is always making mountains out of molehills and exaggerating ordinary vicissitudes into major setbacks.

A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.

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.

An investor calculates what a stock is worth, based on the value of its businesses.

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

Only in the exceptional case, where the integrity and competence of the advisers have been thoroughly demonstrated, should the investor act upon the advice of others without understanding and approving the decision made.

The individual investor should act consistently as an investor and not as a speculator. This means ... that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase.

To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.

Even the most conservative must realize that the recent transformation of surplus from an individual to a national disaster implies a scathing indictment of our capitalist system as it has now developed.

Instead of passing blithely over into that Promised Land, flowing almost literally with milk and honey, it may be our destiny to wander a full 40 years or more in the wilderness of doubt and divided sentiments.

Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop.

To be an investor you must be a believer in a better tomorrow.

To have a true investment, there must be a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.

We are convinced that the intelligent investor can derive satisfactory results from pricing of either type (market timing or fundamental analysis via price). We are equally sure that if he places his emphasis on timing, in the sense of forecasting, he will end up as a speculator and with a speculator's financial results." And "The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices.

The true investor... will do better if he forgets about the stock market and pays attention to his dividend returns and to the operation results of his companies.

The intelligent investor should recognize that market panics can create great prices for good companies and good prices for great companies.

Buy not on optimism, but on arithmetic.

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.

we have complaints that institutional dominance of the stock market has put 'the small investor at a disadvantage because he can't compete with the trust companies' huge resources, etc. The facts are quite the opposite. It may be that the institutions are better equipped than the individual to speculate in the market.But I am convinced that an individual investor with sound principles, and soundly advised, can do distinctly better over the long pull than large institutions.

In the short run, the market is a voting machine, but in the long run it is a weighing machine.

The chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

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.

Individuals who cannot master their emotions are ill-suited to profit from the investment process.

Successful investing is about managing risk, not avoiding it.

Knowledge is only one ingredient on arriving at a stock's proper price. The other ingredient, fully as important as information, is sound judgment.

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

If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.

Investing isn't about beating others at their game. It's about controlling yourself at your own game.

It is our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity - provided that the buyer is informed and experienced and he practices adequate diversification. For, if the price is low enough to create a substantial margin of safety, the security thereby meets our criterion of investment.

In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.

It requires strength of character in order to think and to act in opposite fashion from the crowd and also patience to wait for opportunities that may be spaced years apart.