Top 197 Quotes & Sayings by Benjamin Graham - Page 3

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.

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

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.

Never mingle your speculative and investment operations in the same account nor in any part of your thinking.

Avoid second-quality issues in making up a portfolio unless they are demonstrable bargains.

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.

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.

To enjoy a reasonable chance for continued better than average results, the investor must follow policies which are (1) inherently sound and promising, and (2) not popular on Wall Street.

We urge the beginner in security buying not to waste his efforts and his money in trying to beat the market. Let him study security values and initially test out his judgment on price versus value with the smallest possible sums.

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 existence of such a war chest might go far to strengthen our prestige and frighten off any would be assailant.

Individual security bargains may be located by the process of security analysis practically at any time. They can be bought with good overall results at all periods except when the general market itself is clearly in a selling range for investors. They show up to best advantage during the years in which the market remains in a relatively narrow and neutral area.

Why should the cotton growers suffer if there is shortage of wheat?

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.

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.

It is a misfortune of the times that all of us must needs be amateur economists-including, and perhaps especially, the professionals.

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.

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.

there is a tendency in part of Wall Street people to pay excessive attention to the most recent figures and the present financial picture.

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.

To establish the right price for a stock, the market must have adequate information, but it by no means follows that is the market has this information it will thereupon establish the right price.

The investor should be aware that even though safety of its principal and interest may be unquestioned, a long term bond could vary widely in market price in response to changes in interest rates.

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.

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

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.

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

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.

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

The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.

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.

Cartels have spread and will spread as long as the world lacks an effective mechanism by which balanced expansion may be achieved without a resulting disruption of prices.

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.

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.

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.

In other words, the market is not a weighing machine, on which the value of each issue is recorded by an exact and impersonal mechanism, in accordance with its specific qualities. Rather should we say that the market is a voting machine, whereon countless individuals register choices which are the product partly of reason and partly of emotion.

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.

The value of the security analyst to the investor depends largely on the investor's own attitude. If the investor asks the analyst the right questions, he is likely to get the right or at least valuable answers.

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

There is a close logical connection between the concept of a safety margin and the principle of diversification.

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 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.

I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities.

The idea of storage as a solution of economic problems at least has the support of common sense.It is diametrically opposed to the topsy-turvy Alice-in-Wonderland reasoning that has marked so much of our depression thinking and policy.

Real investment risk is measured not by the percent that a stock may decline in price in relation to the general market in a given period, but by the danger of a loss of quality and earnings power through economic changes or deterioration in management.

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

The volume of credit depends upon three factors: the desire to borrow, the ability to lend and the desire to lend.

I am more and more impressed with the possibilities of history's repeating itself on many different counts. You don't get very far in Wall Street with the simple, convenient conclusion that a given level of prices is not too high.

Successful investment may become substantially a matter of techniques and criteria that are learnable, rather than the product of unique and incommunicable mental powers.

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 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.

The ideal form of common stock analysis leads to a valuation of the issue which can be compared with the current price to determine whether or not the security is an attractive purchase.

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.

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.

The correct attitude of the security analyst toward the stock market might well be that of a man toward his wife. He shouldn't pay too much attention to what the lady says, but he can't afford to ignore it entirely. That is pretty much the position that most of us find ourselves vis-à-vis the stock market.

The qualitative factors upon which most stress is laid are the nature of the business and the character of the management. These elements are exceedingly important, but they are also exceedingly difficult to deal with intelligently.

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

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.

Calculate a stock's price/earnings ratio yourself, using Graham's formula of current price divided by average earnings over the past three years.