The defensive (or passive) investor will place chief emphasis on the avoidance of serious mistakes or losses. His second aim will be freedom from effort, annoyance, and the need for making frequent decisions.
BENJAMIN GRAHAMRather 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.
More Benjamin Graham Quotes
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In the old legend the wise men finally boiled down the history of mortal affairs into a single phrase: ‘This too will pass.’
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A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.
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In an ideal world, the intelligent investor would hold stocks only when they are cheap and sell them when they become overpriced, then duck into the bunker of bonds and cash until stocks again become cheap enough to buy.
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Every corporate security may be best viewed, in the first instance, as an ownership interest in, or a claim against, a specific business enterprise.
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Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it – even though others may hesitate or differ.
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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.
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The stock market resembles a huge laundry in which institutions take in large blocks of each others washing … without rhyme or reason.
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No matter how careful you are, the one risk no investor can ever eliminate is the risk of being wrong. Only by insisting on what Graham called the “margin of safety” – never overpaying, no matter how exciting an investment seems to be – can you minimize your odds of error.
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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.
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The memory of the financial community is proverbially and distressingly short.
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The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future.
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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.
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If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what`s going to happen to the stock market.
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It is a fact worth pondering that four centuries ago the evil of “an abundance or surplus” arose from its being kept off the market, while today the evil of surplus lies in its being thrown upon the market.
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Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble… to give way to hope, fear and greed.
BENJAMIN GRAHAM