Ben Graham

From The Intelligent Investor:

  • An Investment operation is one which, upon thorough analysis, promises safety of principal and satisfactory return. Operations not meeting these requirements are speculative (p. 3)
  • Though business conditions may change, corporations and securities may change, and financial institutions and regulations may change, human nature remains essentially 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. (Introduction)
  • The word “intelligent” will be used in its common and dictionary sense as meaning “endowed with the capacity for knowledge and understanding ” (p. 4)
  • In theory it is not too difficult to invest in common stocks soundly, conservatively, and with a minimum of excitement and regrets. In practice, however, the common-stock investor finds himself beset with confusions and temptation – both external and internal. On the other side of the picture – in the investor’s own mind and temperament – there is likely to be an urge, frequently unconscious, toward speculation, toward making money quickly and excitedly, toward participating in the moods and aberrations of the crowd. p.8
  • Let us repeat therefore, that the genuine investor in common stocks does not need a great equipment of brains and knowledge, but he does need some unusual qualities of character. p.8
  • Buying such an (popular) issue is like betting on a top-heavy favorite in a horse race. The chances may be on your side, but the real odds are against you. You may take it as an axiom that you cannot profit on Wall street by continuously doing the obvious or the popular thing. (p. 14)
  • In the depths of a depressed or “bear” market the average person can see no ray of light ahead and can think only in terms of worse to come. So too, when an individual company or industry begins to lose ground in the economy, Wall Street is quick to assume that its future is entirely hopeless and it should be avoided at any price. The two types of reasoning are similar, and equally fallacious. (p. 15)
  • The defensive investor will buy: United Savings bonds; a diversified list of leading common stocks at prices that seem reasonable in light of past market experience; shares of leading investment funds p. 18
  • The enterprising investor will buy: as above; growth stocks (with caution); representative common stocks when the general market is historically low; secondary common stocks, corporate bonds, and preferred stocks at bargain levels etc… p. 18
  • It is becoming increasingly difficult to attain that peculiar combination of alertness and detachment which characterizes the successful investor as distinguished from the speculator. 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. (p. 21)
  • 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 extraordinarily low prices. (p. 25)
  • But if the results of his study were reassuring – as they should have been – he was entitled then to disregard the market decline as a temporary vagary of finance, unless he had the funds and the courage to take advantage of it by buying more on the bargain basis offered. (p. 26)
  • By pricing we mean the endeavor to buy stocks when they are quoted below their fair value and to sell them when they rise above such value. A less ambitious form of pricing is the simple effort to make sure that when you buy you do not pay too much for your stocks. (p. 27)
  • We are convinced that the intelligent investor can derive satisfactory results from pricing of either type. 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 (p. 27)
  • The investor can scarcely take seriously the innumerable predictions which appear almost daily and are his for the asking Yet in many cases he pays attention to them and even acts upon them? Why? Because he has been persuaded that it is important for him to form some opinion of the future course of the stock market, and because he feels that the brokerage or service forecast is at least more dependable than his own. (p. 27)
  • Timing is of no real value to the investor unless it coincides with pricing – that is, unless it enables him to repurchase his shares at substantially under his previous selling price. p. 28
  • By shifting his emphasis from price movements as such to their effect on the level of values the investor can retain his original and proper status as teh buyer of sound securities and at the same time react intelligently to teh recurrent fluctuations of the stock market. (p. 31)
  • But, if the investor intends to buy and sell recurrently, his weapons must be a frame of mind and a principle of action which are basically different from those of the trader and speculator. He must deal in values, not in price movements. In a word, he must be psychologically prepared to be a true investor and not a speculator masquerading as an investor. (p. 34)
  • Their most familiar argument is that a stock should be bought because it has advanced and should be sold because it has declined. If true investment has one fundamental principle, it is likely to be the opposite of that one p. 38
  • The true investor scarcely ever has to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. (p. 40)
  • Basically, 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. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies. (p. 42)
  • He should always remember that market quotations are there for his convenience, either to be taken advantage of or to be ignored. (p. 43)
  • If the reason people invest is to make money, then in seeking advice they are asking others to tell them how to make money. That idea has some element of naiveté. Businessmen seek professional advice on various elements of their business, but they do not expect to be told how to make a profit (p. 45)

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