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.
BENJAMIN GRAHAMThe true investor… will do better if he forgets about the stock market and pays attention to his dividend returns and to the operation results of his companies.
More Benjamin Graham Quotes
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Why should the cotton growers suffer if there is shortage of wheat?
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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.
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As in roulette, same is true of the stock trader, who will find that the expense of trading weights the dice heavily against him.
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Most businesses change in character and quality over the years, sometimes for the better, perhaps more often for the worse. The investor need not watch his companies’ performance like a hawk; but he should give it a good, hard look from time to time.
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Both individual skill (art) and chance are important factors in determining success or failure.
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The money cost of the reservoir plan literally fades into insignificance when it is compared with the financial burden which the great depression imposed on the nation.
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Never mingle your speculative and investment operations in the same account nor in any part of your thinking.
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Nothing important on Wall Street can be counted on to occur exactly in the same way as it happened before.
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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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In security analysis the prime stress is laid upon protection against untoward events. We obtain this protection by insisting upon margins of safety, or values well in excess of the price paid.
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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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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.
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Even the most conservative must realize that the recent transformation of surplus from an individual to a national disaster implies a scathing indictment of our capitalist system as it has now developed.
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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.
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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.
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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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The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future.
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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.
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Investing is most intelligent when it is most businesslike.
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It should be remembered that a decline of 50% fully offsets a preceding advance of 100%.
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Successful investing professionals are disciplined and consistent and they think a great deal about what they do and how they do it.
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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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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.
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At heart, “uncertainty” and “investing” are synonyms.
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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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If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.
BENJAMIN GRAHAM