When somebody asserts that a stock has an earning power of so much, I am sure that the person who hears him doesn’t know what he means, and there is a good chance that the man who uses it doesn’t know what it means.
BENJAMIN GRAHAMIt is a misfortune of the times that all of us must needs be amateur economists-including, and perhaps especially, the professionals.
More Benjamin Graham Quotes
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Investing is most intelligent when it is most businesslike.
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Both individual skill (art) and chance are important factors in determining success or failure.
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Losing some money is an inevitable part of investing, and there’s nothing you can do to prevent it. But to be an intelligent investor, you must take responsibility for ensuring that you never lose most or all of your money.
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Instead of passing blithely over into that Promised Land, flowing almost literally with milk and honey, it may be our destiny to wander a full 40 years or more in the wilderness of doubt and divided sentiments.
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Buy not on optimism, but on arithmetic.
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Always buy your straw hats in the Winter
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The essence of investment management is the management of risks, not the management of returns.
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Why should the cotton growers suffer if there is shortage of wheat?
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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 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.
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There is no reason to feel any shame in hiring someone to pick stocks or mutual funds for you. But there’s one responsibility that you must never delegate. You, and no one but you, must investigate whether an adviser is trustworthy and charges reasonable fees.
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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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Obvious prospects for physical growth in a business do not translate into obvious profits for investors.
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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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An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.
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Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop.
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Whenever the investor sold out in an upswing as soon as the top level of the previous well-recognized bull market was reached, he had a chance in the next bear market to buy back at one third (or better) below his selling price.
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To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.
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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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THERE is widespread agreement among economists that abuse of credit constitutes one of the chief unwholesome elements in business booms and is mainly responsible for the ensuing crash and depression.
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It should be remembered that a decline of 50% fully offsets a preceding advance of 100%.
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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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Real investment risk is measured not by the percent that a stock may decline in price in relation to the general market in a given period, but by the danger of a loss of quality and earnings power through economic changes or deterioration in management.
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Before you invest, you must ensure that you have realistically assessed your probability of being right and how you will react to the consequences of being wrong.
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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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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.
BENJAMIN GRAHAM