A Quote by Benjamin Graham
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.
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I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low P/E, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time.
In my opinion, the greatest misconception about the market is the idea that if you buy and hold stocks for long periods of time, you'll always make money. Let me give you some specific examples. Anyone who bought the stock market at any time between the 1896 low and the 1932 low would have lost money. In other words, there's a 36 year period in which a buy-and-hold strategy would have lost money. As a more modern example, anyone who bought the market at any time between the 1962 low and the 1974 low would have lost money.
A bargain is in its very essence a hostile transaction do not all men try to abate the price of all they buy? I contend that a bargain even between brethren is a declaration of war.
When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom.
What is the price of experience? Do men buy it for a song? Or wisdom for a dance in the street? No, it is bought with the price of all the man hath, his house, his wife, his children.
But my system for over 30 years has been this: When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30.
The time to buy stocks is consistently over time. You should never buy your investments with the idea, 'I have to get a certain return.' You should look at the best return possible and learn to live with that. But you should not try to make your investments earn what you feel you need. It doesn't work that way. The stock doesn't know you own it.
Investors... can't pick stocks that are better than average. Stocks are a good thing to own over time. There's only two things you can do wrong: You can buy the wrong ones, and you can buy or sell them at the wrong time. And the truth is you never need to sell them.
Do not buy the hype from Wall St. and the press that stocks always go up. There are long periods when stocks do nothing and other investments are better.
Experience is never at bargain price.
If you expect to continue to purchase stocks throughout your life, you should welcome price declines as a way to add stocks more cheaply to your portfolio.
Stocks are the only thing that people are happy to buy when the price goes up.
It's easy to buy. Prove that you bought at the right time and the right price.
So the first thing I learned about how to get superior performance is not to buy stocks that are near their lows, but to buy stocks that are coming out of broad bases and beginning to make new highs.
Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?
For somebody for whom they're going to buy a certain amount of gas irrespective of the price, should they really spend so much time thinking about the price of gas? It doesn't affect anything they do.
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