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.
BENJAMIN GRAHAMNo 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.
More Benjamin Graham Quotes
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In the financial markets, hindsight is forever 20/20, but foresight is legally blind. And thus, for most investors, market timing is a practical and emotional impossibility.
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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.
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A great company is not a great investment if you pay too much for the stock.
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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.
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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.
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Always buy your straw hats in the Winter
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… the loss of public confidence in the financial community growing out of its own conduct in recent years. I insist that more damage has been done to stock values and to the future of equities from inside Wall Street than from outside Wall Street.
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The existence of such a war chest might go far to strengthen our prestige and frighten off any would be assailant.
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The Reservoir plan is an engineering mechanism applied to the field of economics, and in its essence it has nothing to do with democracy or any other political philosophy.
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While enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster
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In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.
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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.
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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.
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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.
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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.
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Those with the enterprise lack the money and those with the money lack the enterprise to buy stocks when they are cheap.
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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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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.
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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.
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Never buy a stock because it has gone up or sell one because it has gone down.
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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.
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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.
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Why should the cotton growers suffer if there is shortage of wheat?
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Diversification is an established tenet of conservative investment.
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Successful investment may become substantially a matter of techniques and criteria that are learnable, rather than the product of unique and incommunicable mental powers.
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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.
BENJAMIN GRAHAM