650 Wise Benjamin Graham Quotes On Successful Investing
1. “He also wants to see managers who set and meet realistic goals; build their businesses from within rather than through acquisition; allocate capital wisely; and do not pay themselves hundred-million-dollar jackpots of stock options.”
2. “The investment world nevertheless has enough liars, cheaters, and thieves to keep Satan's check-in clerks frantically busy for decades to come.”
3. “It is an axiom of investment that securities should be purchased because the buyer believes in their soundness, and not because he needs a certain income.”
4. It is our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity — provided that the buyer is informed and experienced and he practices adequate diversification. For, if the price is low enough to create a substantial margin of safety, the security thereby meets our criterion of investment. (pg. 521)
5. “The stock investor is neither right or wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.”
6. “Buy not on optimism, but on arithmetic.”
7. “You must never delude yourself into thinking that you’re investing when you’re speculating.”
8. “The future value of every investment is a function of its present price. The higher the price you pay, the lower your return will be.”
9. “Toda la infelicidad humana tiene un mismo origen: no saber estar tranquilamente sin hacer nada en una habitación.”
10. “The higher the quality of a company the more inescapable is the speculative component in its price, and the more subject it is to wide price variations.”
11. The ideal form of common stock analysis leads to a valuation of the issue which can be compared with the current price to determine whether or not the security is an attractive purchase. (pg. 288)
12. “In 1982, his biggest investment was Treasury bonds; right after that, he made Chrysler his top holding, even though most experts expected the automaker to go bankrupt; then, in 1986, Lynch put almost 20% of Fidelity Magellan in foreign stocks like Honda, Norsk Hydro, and Volvo. So, before you buy a U.S. stock fund, compare the holdings listed in its latest report against the roster of the S & P 500 index; if they look like Tweedledee and Tweedledum, shop for another fund.7”
13. “The investor must recognize that there are uncertain, and hence, speculative elements inherent in any policy he follows.”
14. “The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future.”
15. “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.”
16. “However, the risk of paying too high a price for good-quality stocks—while a real one—is not the chief hazard confronting the average buyer of securities. Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions. The purchasers view the current good earnings as equivalent to “earning power” and assume that prosperity is synonymous with safety.”
17. “It is the mark of an educated mind to expect that amount of exactness which the nature of the particular subject admits. It”
18. “Value = Current (Normal) Earnings × (8.5 plus twice the expected annual growth rate)”
19. “It requires a great deal of boldness and a great deal of caution to make a great fortune; and when you have got it, it requires ten times as much wit to keep it. —Nathan Mayer Rothschild”
20. “Through chances various, through all vicissitudes, we make our way….”
21. “closed at $1.19 per share. Weighing the evidence objectively, the intelligent investor should conclude that IPO does not stand only for “initial public offering.” More accurately, it is also shorthand for: It’s Probably Overpriced, Imaginary Profits Only, Insiders’ Private Opportunity, or Idiotic, Preposterous, and Outrageous.”
22. “A reduction in common-stock holdings where needed to bring it down to a maximum of 50 per cent of the total portfolio. The capital-gains tax must be paid with as good grace as possible, and the proceeds invested in first-quality bonds or held as a savings deposit.”
23. “Um cínico disse uma vez a G.K. Chesterton, o romancista e ensaísta britânico: “Abençoado seja aquele que nada espera, pois não ficará decepcionado.” A réplica de Chesterton? “Abençoado seja aquele que nada espera, pois se deliciará com tudo.”
24. “Graham feels that five elements are decisive.1 He summarizes them as: the company’s “general long-term prospects” the quality of its management its financial strength and capital structure its dividend record and its current dividend rate.”
25. “Hemos visto ganar y conservar mucho más dinero a «personas comunes» que estaban temperamentalmente bien dotadas para el proceso de inversión que a otras personas que carecían de esta buena predisposición anímica, aunque tuviesen un gran conocimiento de las finanzas, la contabilidad y la historia del mercado de valores.”
26. 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. (pg. 129)
27. “The punches you miss are the ones that wear you out. —Boxing trainer Angelo Dundee”
28. “To establish the right price for a stock the market must have adequate information, but it by no means follows that if the market has this information it will thereupon establish the right price.”
29. The only thing you should do with pro forma earnings is ignore them. (pg. 323)
30. “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”
31. Wall Street has a few prudent principles; the trouble is that they are always forgotten when they are most needed. (pg. 409)
32. “If you buy a stock purely because its price has been going up—instead of asking whether the underlying company’s value is increasing—then sooner or later you will be extremely sorry. That’s not a likelihood. It is a certainty.”
33. “Economic events rarely unfold in the way stock-market people forecast them.”
34. “Hence the greater part of the impressive market record for that period was based on a change in investors’ and speculators’ attitudes rather than in underlying corporate values.”
35. “From these two broad examples we draw two morals for our readers: Obvious prospects for physical growth in a business do not translate into obvious profits for investors. The experts do not have dependable ways of selecting and concentrating on the most promising companies in the most promising industries.”
36. “Take the five stocks in the Dow Jones Industrial Average with the lowest stock prices and highest dividend yields. Discard the one with the lowest price. Put 40% of your money in the stock with the second-lowest price. Put 20% in each of the three remaining stocks. One year later, sort the Dow the same way and reset the portfolio according to steps 1 through 4. Repeat until wealthy. Over”
37. “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.”
38. “And back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Sensing that the market was getting out of hand, the great physicist muttered that he “could calculate the motions of the heavenly bodies, but not the madness of the people.” Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price—and lost £20,000 (or more than $3 million in today’s money). For the rest of his life, he forbade anyone to speak the words “South Sea” in his presence.”
39. “A long-term investor is the only kind of investor there is. Someone who can’t hold on to stocks for more than a few months at a time is doomed to end up not as a victor but as a victim.”
40. “The longer the bull market lasts the more severely investors will be affected with amnesia; after five years or so, many people no longer believe that bear markets are possible.”
41. “The analysis of security values is not an abstruse science. While in essence mathematical, it does not soar into the realms of calculus -- in fact, it rarely gets as far as algebra.”
42. “An elementary requirement for the intelligent investor is an ability to resist the blandishments of salesmen offering new common-stock issues during bull markets. Even if one or two can be found that can pass severe tests of quality and value, it is probably bad policy to get mixed up in this sort of business. Of course the salesman will point to many such issues which have had good-sized market advances—including some that go up spectacularly the very day they are sold. But all this is part of the speculative atmosphere. It is easy money. For every dollar you make in this way you will be lucky if you end up by losing only two. Some of these issues may prove excellent buys—a few years later, when nobody wants them and they can be had at a small fraction of their true worth.”
43. “Jeremy Siegel’s Stocks for the Long Run (1994)—culminating,”
44. “Thus, in strict logic, all investment-grade preferred stocks should be bought by corporations, just as all tax-exempt bonds should be bought by investors who pay income tax.”
45. “Experience shows that when really cheap issues are scarce the general market is high; but we do not present this as an infallible principle.”
46. “Some companies with an exemplary record of shutting their own gates are Longleaf, Numeric, Oakmark, T. Rowe Price, Vanguard, and Wasatch.”
47. “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.”
48. “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.” Benjamin Graham
49. The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price. (pg. 517)
50. “The company is a Johnny-One-Note, relying on one customer (or a handful) for most of its revenues. In October 1999, fiber-optics maker Sycamore Networks, Inc. sold stock to the public for the first time. The prospectus revealed that one customer, Williams Communications, accounted for 100% of Sycamore’s $11 million in total revenues. Traders blithely valued Sycamore’s shares at $15 billion. Unfortunately, Williams went bankrupt just over two years later. Although Sycamore picked up other customers, its stock lost 97% between 2000 and 2002.”
51. “The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.”
52. “The longer the bull market lasts the more severely investors will be affected with amnesia; after five years or so, many people no longer believe that bear markets are possible. p.190”
53. Confusing speculation with investment is always a mistake. (pg. 36)
54. “the really dreadful losses” always occur after “the buyer forgot to ask ‘How much?”
55. “We have advised against the purchase at “full prices” of three important categories of securities: (1) foreign bonds, (2) ordinary preferred stocks, and (3) secondary common stocks, including, of course, original offerings of such issues. By “full prices” we mean prices close to par for bonds or preferred stocks, and prices that represent about the fair business value of the enterprise in the case of common stocks. The greater number of defensive investors are to avoid these categories regardless of price; the enterprising investor is to buy them only when obtainable at bargain prices—which we define as prices not more than two-thirds of the appraisal value of the securities.”
56. “the readers to buy their stocks as they bought their groceries, not as they bought their perfume”
57. Investing isn’t about beating others at their game. It’s about controlling yourself at your own game. (pg. 219)
58. “The true investor scarcely ever is forced 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.* Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.”
59. “dollar-cost averaging,” which means simply that the practitioner invests in common stocks the same number of dollars each month or each quarter.”
60. “Invest at the point of maximum pessimism.”—Sir John Templeton
61. “The quality and conduct of management. A company’s executives should say what they will do, then do what they said. Read the past annual reports to see what forecasts the managers made and if they fulfilled them or fell short. Managers should forthrightly admit their failures and take responsibility for them, rather than blaming all-purpose scapegoats like “the economy,” “uncertainty,” or “weak demand.” Check whether the tone and substance of the chairman’s letter stay constant, or fluctuate with the latest fads on Wall Street. (Pay special attention to boom years like 1999: Did the executives of a cement or underwear company suddenly declare that they were “on the leading edge of the transformative software revolution”
62. “Buy not on optimism, but on arithmetic.” Benjamin Graham
63. “We recommended that the investor divide his holdings between high-grade bonds and leading common stocks; that the proportion held in bonds be never less than 25% or more than 75%, with the converse being necessarily true for the common-stock component; that his simplest choice would be to maintain a 50–50 proportion between the two, with adjustments to restore the equality when market developments had disturbed it by as much as, say, 5%.”
64. “this book will teach you three powerful lessons: how you can minimize the odds of suffering irreversible losses; how you can maximize the chances of achieving sustainable gains; how you can control the self-defeating behavior that keeps most investors from reaching their full potential.”
65. “Financial scholars have been studying mutual-fund performance for at least a half century, and they are virtually unanimous on several points: the average fund does not pick stocks well enough to overcome its costs of researching and trading them; the higher a fund’s expenses, the lower its returns; the more frequently a fund trades its stocks, the less it tends to earn; highly volatile funds, which bounce up and down more than average, are likely to stay volatile; funds with high past returns are unlikely to remain winners for long.”
66. “The psychologists Daniel Kahnerman and Amos Tversky have shown when humans estimate the likelihood or frequency of an event, we make that judgment based not on how often the event has actually occurred, but on how vivid the past examples are.”
67. “What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”
68. “The quantitative factors lend themselves far better to thoroughgoing analysis than do the qualitative factors. The former are fewer in number, more easily obtainable, and much better suited to the forming of definite and dependable conclusions.”
69. “Today’s defensive investor can do even better—by buying a total stock-market index fund that holds essentially every stock worth having. A low-cost index fund is the best tool ever created for low-maintenance stock investing—and any effort to improve on it takes more work (and incurs more risk and higher costs) than a truly defensive investor can justify.”
70. “El inversor inteligente es un realista que vende a optimistas y compra a pesimistas.”
71. “I think that the future of equity investment, when it is made at a reasonable price, is a promising one, and one that deserves the confidence of those interested in the investment field.”
72. 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. (pg. xiii)
73. “Sound common stocks, bought at sound prices, are always good investments.”
74. The intelligent investor should recognise that market panics can create great prices for good companies and good prices for great companies. (pg. 483)
75. “Individuals who cannot master their emotions are ill-suited to profit from the investment process.” Benjamin Graham
76. “The individual investor should act consistently as an investor and not as a speculator.” Benjamin Graham
77. At heart, “uncertainty” and “investing” are synonyms. (pg. 535)
78. “Read backwards. When you research a company’s financial reports, start reading on the last page and slowly work your way toward the front. Anything that the company doesn’t want you to find is buried in the back—which is precisely why you should look there first.”
79. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. (pg. 205)
80. “On January 7, 1973, the New York Times featured an interview with one of the nation’s top financial forecasters, who urged investors to buy stocks without hesitation: “It’s very rare that you can be as unqualifiedly bullish as you can now.” That forecaster was named Alan Greenspan, and it’s very rare that anyone has ever been so unqualifiedly wrong as the future Federal Reserve chairman was that day: 1973 and 1974 turned out to be the worst years for economic growth and the stock market since the Great Depression.”
81. “When values are determined chiefly by the outlook, the resultant judgments are not subject to any mathematical controls and are almost inevitably carried to extremes.”
82. “The analyst’s conclusions must always rest upon the figures and upon established tests and standards.”
83. “Because so few investors have the guts to cling to stocks in a falling market, Graham insists that everyone should keep a minimum of 25% in bonds. That cushion, he argues, will give you the courage to keep the rest of your money in stocks even when stocks stink.”
84. “Intelligence has nothing to do with IQ or SAT scores. It simply means being patient, disciplined, and eager to learn.”
85. “In the stock market, facts are important, but emphasis is all important.”
86. 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. (pg. 205)
87. “The only significance of stock market gyrations to the true investor is that they give him an opportunity to buy good common stocks when they are cheap -- or at least reasonably priced -- and at times offer him an invitation to sell out at temptingly high levels.”
88. “look at the company’s capital structure. Turn to the balance sheet to see how much debt (including preferred stock) the company has; in general, long-term debt should be under 50% of total capital. In the footnotes to the financial statements, determine whether the long-term debt is fixed-rate (with constant interest payments) or variable (with payments that fluctuate, which could become costly if interest rates rise).”
89. “Know what you are doing—know your business.” For the investor this means: Do not try to make “business profits” out of securities”
90. “Thus, in sum, we say that to have a true investment there must be present a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.”
91. “Investors feelings and reactions regarding inflation are probably more the result of the stock market action that they have recently experienced than the cause of it.”
92. “So first find a low-cost fund whose managers are major shareholders, dare to be different, don’t hype their returns, and have shown a willingness to shut down before they get too big for their britches. Then, and only then, consult their Morningstar rating.10”
93. If fees consume more than 1% of your assets annually, you should probably shop for another adviser. (pg. 277)
94. “The Interborough issues are an example of a rather special group of situations in which analysis may reach more definite conclusions respecting intrinsic value than in the ordinary case. These situations may involve a liquidation or give rise to technical operations known as “arbitrage” or “hedging.”
95. “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.” —Warren Buffett
96. “I quickly convinced myself that the true key to material happiness lay in a modest standard of living which could be achieved with little difficulty under almost all economic conditions.”
97. “Even when the underlying motive of purchase is mere speculative greed, human nature desires to conceal this unlovely impulse behind a screen of apparent logic and good sense”
98. “Successful investing professionals are disciplined and consistent and they think a great deal about what they do and how they do it.” Benjamin Graham
99. “Buy when most people, including experts, are pessimistic, and sell when they are actively optimistic.” and “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.”
100. “... investors are constitutionally averse to buying into a troubled situation.”
101. “A comparison of eToys with Toys “R” Us, Inc.—its biggest rival—is shocking. In the preceding three months, Toys “R” Us had earned $27 million in net income and had sold over 70 times more goods than eToys had sold in an entire year. And yet as Figure 17-3 shows, the stock market valued eToys at nearly $2 billion more than Toys “R” Us.”
102. Mr. Market’s job is to provide you with prices; your job is to decide whether it is to your advantage to act on them. You no not have to trade with him just because he constantly begs you to. (pg. 215)
103. “The best values today are often found in the stocks that were once hot and have since gone cold. Throughout history, such stocks have often provided the margin of safety that a defensive investor demands.”
104. “Likewise, investors were delighted to earn 11% on bank certificates of deposit (CDs) in 1980 and are bitterly disappointed to be earning only around 2% in 2003—even though they were losing money after inflation back then but are keeping up with inflation now.”
105. “Three solid books full of timely and specific examples are Martin Fridson and Fernando Alvarez’s Financial Statement Analysis, Charles Mulford and Eugene Comiskey’s The Financial Numbers Game, and Howard Schilit’s Financial Shenanigans.”
106. “An intelligent investor gets satisfaction from the thought that his operations are exactly opposite to those of the crowd.” Benjamin Graham
107. “Successful investment may become substantially a matter of techniques and criteria that are learnable, rather than the product of unique and incommunicable mental powers.” Benjamin Graham
108. “The market is fond of making mountains out of molehills and exaggerating ordinary vicissitudes into major setbacks.* Even a mere lack of interest or enthusiasm may impel a price decline to absurdly low levels. Thus we have what appear to be two major sources of undervaluation: (1) currently disappointing results and (2) protracted neglect or unpopularity. However, neither of these causes, if considered by itself alone, can be relied on as a guide to successful common-stock investment. How can we be sure that the currently disappointing results are indeed going to be only temporary? True, we can supply excellent examples of that happening. The steel stocks used to be famous for their cyclical quality, and the shrewd buyer could acquire them at low prices when earnings were low and sell them out in boom years at a fine profit.”
109. “Read backwards. When you research a company’s financial reports, start reading on the last page and slowly work your way toward the front. Anything”
110. “you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position.”
111. “The heart of Graham’s argument is that the intelligent investor must never forecast the future exclusively by extrapolating the past.”
112. “On December 7, 1999, Kevin Landis, portfolio manager of the Firsthand mutual funds, appeared on CNN’s Moneyline telecast. Asked if wireless telecommunication stocks were overvalued—with many trading at infinite multiples of their earnings—Landis had a ready answer. “It’s not a mania,” he shot back. “Look at the outright growth, the absolute value of the growth. It’s big.”
113. “Today’s investor is so concerned with anticipating the future that he is already paying handsomely for it in advance. Thus what he has projected with so much study and care may actually happen and still not bring him any profit. If it should fail to materialize to the degree expected he may in fact be faced with serious temporary and perhaps even permanent loss.”
114. “Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
115. “If they follow our prescription they will confine themselves to high-grade bonds and the common stocks of leading corporations, preferably those that can be purchased at individual price levels that are not high in the light of experience and analysis.”
116. “They used to say about the Bourbons that they forgot nothing and they learned nothing, and I'll say about the Wall Street people, typically, is that they learn nothing, and they forget everything.”
117. Never buy a stock because it has gone up or sell one because it has gone down. (pg. 206)
118. “Experience teaches that the time to buy preferred stocks is when their price is unduly depressed by temporary adversity. (At such times they may be well suited to the aggressive investor but too unconventional for the defensive investor.)”
119. “implied that “at normal levels of the market” the investor should be able to obtain an initial dividend return of between 31⁄2% and 41⁄2% on his stock purchases, to which should be added a steady increase in underly- ing value (and in the “normal market price”) of a representative”
120. “It is our belief that shareholders should demand of their managements either a normal payout of earnings—on the order, say, of two-thirds—or else a clear-cut demonstration that the reinvested profits have produced a satisfactory increase in per-share earnings. Such a demonstration could ordinarily be made in the case of a recognized growth company. But in many other cases a low payout is clearly the cause of an average market price that is below fair value, and here the shareholders have every right to inquire and probably to complain.”
121. “The intelligent investor shouldn’t ignore Mr. Market entirely. Instead, you should do business with him- but only to the extent that it serves your interests.”
122. “If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume. ” Benjamin Graham
123. “One technique that can be helpful: See which leading professional money managers own the same stocks you do. If one or two names keep turning up, go to the websites of those fund companies and download their most recent reports. By seeing which other stocks these investors own, you can learn more about what qualities they have in common; by reading the managers’ commentary, you may get ideas on how to improve your own approach.3”
124. “I quickly convinced myself that the true key to happiness lay in a modest standard of living which could be achieved with little difficulty under almost all economic conditions.”
125. “Calculation of the Past Growth Rate It is of prime importance that the growth factor in a company’s record be taken adequately into account. Where the growth has been large the recent earnings will be well above the seven-or ten-year average, and analysts may deem these long-term figures irrelevant. This need not be the case. The earnings can be given in terms both of the average and the latest figure. We suggest that the growth rate itself be calculated by comparing the average of the last three years with corresponding figures ten years earlier.”
126. “Why should not the effects of changing interest rates be divided on some practical and equitable basis between the borrower and the lender? One possibility would be to sell long-term bonds with interest payments that vary with an appropriate index of the going rate.”
127. “Adequate size. A sufficiently strong financial condition. Continued dividends for at least the past 20 years. No earnings deficit in the past ten years. Ten-year growth of at least one-third in per-share earnings. Price of stock no more than 1½ times net asset value. Price no more than 15 times average earnings of the past three years.”
128. “The third is the device of “dollar-cost averaging,” which means simply that the practitioner invests in common stocks the same number”
129. “Another modern development of relevance is the ubiquitous cable television coverage of the stock market. This frenetic lunacy exacerbates the already short-term orientation of most investors. It foments the view that it is possible—or even necessary—to have an opinion on everything pertinent to the financial markets, as opposed to the patient and highly selective approach endorsed by Graham and Dodd.”
130. “The defensive investor must confine himself to the shares of important companies with a long record of profitable operations and in strong financial condition.”
131. “I am convinced that an individual investor with sound principles, and soundly advised, can do distinctly better over the long pull than a large institution.”
132. “The stock market’s performance depends on three factors: real growth (the rise of companies’ earnings and dividends) inflationary growth (the general rise of prices throughout the economy) speculative growth—or decline (any increase or decrease in the investing public’s appetite for stocks)”
133. “The security analyst can only give you certain hints as to what the solution is likely to be, certain indications of a range of value rather than a specific figure, and perhaps a diffident suggestion as to where within this range he believes the probabilities of the future will lie.”
134. “you must thoroughly analyze a company, and the soundness of its underlying businesses, before you buy its stock; you must deliberately protect yourself against serious losses; you must aspire to “adequate,” not extraordinary, performance.”
135. “While enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.”
136. “Americans are getting stronger. Twenty years ago, it took two people to carry ten dollars’ worth of groceries. Today, a five-year-old can do it. —Henny Youngman”
137. “The intelligent investor is a realist who sells to optimists and buys from pessimists.”
138. “The true measure of common stocks values, of course, is not found by reference to price movements alone, but by price in relation to earnings, dividends, future prospects and, to a small extent, asset values.”
139. “Value = Current (Normal) Earnings × (8.5 plus twice the expected annual growth rate) The growth figure should be that expected over the next seven to ten years.7”
140. “If you can invest your money under fair conditions, in fact under attractive specific conditions, I think one certainly should do so even if the market should go down further and even if the securities you buy may also go down after you buy them.”
141. “Perhaps nothing is more indicative of the quality of a company's management than its accounting methods.”
142. “Executives should spend most of their time managing their company in private, not promoting it to the investing public. All too often, CEOs complain that their stock is undervalued no matter how high it goes—forgetting Graham’s insistence that managers should try to keep the stock price from going either too low or too high.8 Meanwhile, all too many chief financial officers give “earnings guidance,” or guesstimates of the company’s quarterly profits. And some firms are hype-o-chondriacs, constantly spewing forth press releases boasting of temporary, trivial, or hypothetical “opportunities.”
143. Never mingle your speculative and investment operations in the same account nor in any part of your thinking. (pg. 22)
144. “An investment operation is one that can be justified on both qualitative and quantitative grounds.”
145. “While a trend shown in the past is a fact, a “future trend” is only an assumption.”
146. “This chapter will begin with two pieces of advice to the investor that cannot avoid being contradictory in their implications. The first is: Don’t take a single year’s earnings seriously. The second is: If you do pay attention to short-term earnings, look out for booby traps in the per-share figures. If our first warning were followed strictly the second would be unnecessary.”
147. “First of all, recognize that an index fund—which owns all the stocks in the market, all the time, without any pretense of being able to select the “best” and avoid the “worst”—will beat most funds over the long run. (If your company doesn’t offer a low-cost index fund in your 401(k), organize your coworkers and petition to have one added.) Its rock-bottom overhead—operating expenses of 0.2% annually, and yearly trading costs of just 0.1%—give the index fund a”
148. “There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are: (1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose.”
149. “The psychological mood of people changes more drastically than anything else in finance. Human nature changes least of all.”
150. “Dividend Record. One of the most persuasive tests of high quality is an uninterrupted record of dividend payments going back over many years. We think that a record of continuous dividend payments for the last 20 years or more is an important plus factor in the company’s quality rating. Indeed the defensive investor might be justified in limiting his purchases to those meeting this test.”
151. “The problem is not whether price changes should be disregarded -- because clearly they should not be -- but rather in what way can the investor and the security analyst deal intelligently with the price changes which take place.”
152. “day trading—holding stocks for a few hours at a time—is one of the best weapons ever invented for committing financial suicide.”
153. “What have we learned? The market scoffs at Graham’s principles in the short run, but they are always revalidated in the end. If you buy a stock purely because its price has been going up—instead of asking whether the underlying company’s value is increasing—then sooner or later you will be extremely sorry. That’s not a likelihood. It is a certainty.”
154. “While it seems easy to foresee which industry will grow the fastest, that foresight has no real value if most other investors are already expecting the same thing.”
155. “Graham urges you to invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price. 3”
156. “This has fluctuated, of course, with the general rate of economic activity, but it has shown no general tendency to advance with wholesale prices or the cost of living.”
157. “Allied to the general pattern of market movements is the general pattern of speculative thinking.”
158. “The correct attitude of the security analyst toward the stock market might well be that of a man toward his wife. He shouldn’t pay too much attention to what the lady says, but he can’t afford to ignore it entirely. That is pretty much the position that most of us find ourselves vis-à-vis the stock market.” Benjamin Graham
159. “Good common stocks are investment media which are subject to speculative influences. The speculative influences are not in the common stocks; they are in the minds of the people who buy and sell them.”
160. “Size is more than ample for each company. Financial condition is adequate in the aggregate, but not for every company.2 Some dividend has been paid by every company since at least 1940. Five of the dividend records go back to the last century. The aggregate earnings have been quite stable in the past decade. None of the companies reported a deficit during the prosperous period 1961–69, but Chrysler showed a small deficit in 1970. The total growth—comparing three-year averages a decade apart—was 77%, or about 6% per year. But five of the firms did not grow by one-third. The ratio of year-end price to three-year average earnings was 839 to $55.5 or 15 to 1—right at our suggested upper limit. The ratio of price to net asset value was 839 to 562—also just within our suggested limit of 1½ to 1.”
161. “The concept of safety can be really useful only if it is based on something more tangible than the psychology of the purchaser.”
162. “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioural discipline that are likely to get you where you want to go.” Benjamin Graham
163. “I believe that the trend of stock equities will continue in the future as it has in the past -- and that is irregularly upward, with some emphasis upon the adverb irregularly.”
164. 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. (pg. 529)
165. “With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles, but we cling tenaciously and unquestioningly to our prejudices.”
166. “Never mingle your speculative and investment operations in the same account nor in any part of your thinking.” Benjamin Graham
167. “The intelligent investor gets interested in big growth stocks not when they are at their most popular – but when something goes wrong.”
168. “Robert Shiller, a finance professor at Yale University, says Graham inspired his valuation approach: Shiller compares the current price of the Standard & Poor’s 500-stock index against average corporate profits over the past 10 years (after inflation). By scanning the historical record, Shiller has shown that when his ratio goes well above 20, the market usually delivers poor returns afterward; when it drops well below 10, stocks typically produce handsome gains down the road.”
169. “the intelligent investor designates a tiny portion of her total portfolio as a “mad money” account. For most of us, 10% of our overall wealth is the maximum permissible amount to put at speculative risk. Never mingle the money in your speculative account with what’s in your investment accounts; never allow your speculative thinking to spill over into your investing activities; and never put more than 10% of your assets into your mad money account, no matter what happens.”
170. “It is a great mistake to refine the analysis of a single year's showing to the last possible penny, in order to build from that some substantial idea of the value of the stock; because it cannot be found in the results for any given year no matter how accurately those results were stated.”
171. “We are convinced that the public generally will derive far better results from fixed-value investments, if selected with exceeding care, than from speculative operations, even though these may be aided by considerable education in financial matters.”
172. “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
173. “The investor’s chief problem and even his worst enemy – is likely to be himself.” Benjamin Graham
174. “Individuals who cannot master their emotions are ill-suited to profit from the investment process.”
175. “what Graham called “quotational” values”
176. By refusing to pay too much for an investment, you minimise the chances that your wealth will ever disappear or suddenly be destroyed. (pg. 527)
177. “inversor representará una pequeña sección transversal”
178. “Once you lose 95% of your money, you have to gain 1,900% just to get back to where you started. 1”
179. “Though business conditions may change, corporations and securities may change, and financial institutions and regulations may change, human nature remains 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.” Benjamin Graham
180. “Financial scholars have been studying mutual-fund performance for at least a half century, and they are virtually unanimous on several points: the average fund does not pick stocks well enough to overcome its costs of researching and trading them; the higher a fund’s expenses, the lower its returns; the more frequently a fund trades its stocks, the less it tends to earn; highly volatile funds, which bounce up and down more than average, are likely to stay volatile; funds with high past returns are unlikely to remain winners for long.2”
181. “There is no other investment that combines (1) absolute assurance of principal and interest payments, (2) the right to demand full “money back” at any time, and (3) guarantee of at least a 5% interest rate for at least ten years.”
182. “In the short run, the market is a voting machine, but in the long run it is a weighing machine.”
183. “In 44 years of Wall Street experience and study, I have never seen dependable calculations made about common stock values, or related investment policies, that went beyond simple arithmetic or the most elementary algebra.”
184. “Experience in former markets indicates that just as they are too high in bull markets, they get too low in bear markets.”
185. The investor’s chief problem – and even his worst enemy – is likely to be himself. (pg. 8)
186. “It is easy in the world to live after the world’s opinion; it is easy in solitude to live after our own; but the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude.”
187. “One of Graham’s most powerful insights is this: “The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.” What does Graham mean by those words “basic advantage”? He means that the intelligent individual investor has the full freedom to choose whether or not to follow Mr. Market. You have the luxury of being able to think for yourself”
188. “to the enterprising investor. He might be interested in special opportunities of the following kinds: Tax-free New Housing Authority bonds effectively guaranteed by the United States government. Taxable but high-yielding New Community bonds, also guaranteed by the United States government. Tax-free industrial bonds issued by municipalities, but serviced by lease payments made by strong corporations.”
189. “Security analysis cannot presume to lay down general rules as to the "proper value" of any given common stock... The prices of common stocks are not carefully thought out computations, but the resultants of a welter of human reactions.”
190. 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. (pg. 360)
191. “In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.”
192. “It is still true that they may choose between maintaining a simple 50–50 division between the two components or a ratio, dependent on their judgment, varying between a minimum of 25% and a maximum of 75% of either.”
193. “Mutual funds are the ultimate way for a defensive investor to capture the upside of stock ownership without the downside of having to police your own portfolio.”
194. “The more a stock has gone up, the more it seems likely to keep going up. But that instinctive belief is flatly contradicted by a fundamental law of financial physics: The bigger they get, the slower they grow. A $1-billion company can double its sales fairly easily; but where can a $50-billion company turn to find another $50 billion in business?”
195. “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 naïveté.”
196. “Graham’s definition of investing could not be clearer: “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.”1 Note”
197. “we advised the readers to buy their stocks as they bought their groceries, not as they bought their perfume.”
198. “Graham urges you to invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.3”
199. 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. (pg. 31)
200. “On the other hand, investing is a unique kind of casino, one where you cannot lose in the end, so long as you play only by the rules that put the odds squarely in your favor.”
201. “To some degree, it is the consequence of the very instability of investors' thinking -- the very variation in investor confidence -- which leads them to view the picture through rosy glasses one year and through dark glasses the next year.”
202. “Wall Street people learn nothing and forget everything.”
203. “De estos dos ejemplos generales se pueden extraer dos lecciones para nuestros lectores: 1. Las perspectivas evidentes de crecimiento físico de un sector no se traducen en beneficios evidentes para los inversionistas.”
204. “we say that to have a true investment there must be present a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.”
205. “Why do you suppose the brokers on the floor of the New York Stock Exchange always cheer at the sound of the closing bell—no matter what the market did that day? Because whenever you trade, they make money—whether you did or not.”
206. “If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them. —Henry David Thoreau, Walden”
207. “In the previous four quarters, Yahoo! had racked up $433 million in revenues and $34.9 million in net income. So Yahoo!’s stock was now priced at 263 times revenues and 3,264 times earnings. (Remember that a P/E ratio much above 25 made Graham grimace!)5”
208. “In June 1970 the question “How much?” could be answered by the magic figure 9.40%—the yield obtainable on new offerings of high-grade public-utility bonds. This has now dropped to about 7.3%, but even that return tempts us to ask, “Why give any other answer?”
209. “By the time everyone decides that a given industry is “obviously” the best one to invest in, the prices of its stocks have been bid up so high that its future returns have nowhere to go but down.”
210. “Real Estate Investment Trusts, or REITs (pronounced “reets”), are companies that own and collect rent from commercial and residential properties.10 Bundled into real-estate mutual funds, REITs do a decent job of combating inflation. The best choice is Vanguard REIT Index Fund; other relatively low-cost choices include Cohen & Steers Realty Shares, Columbia Real Estate Equity Fund, and Fidelity Real Estate Investment Fund.11 While a REIT fund is unlikely to be a foolproof inflation-fighter, in the long run it should give you some defense against the erosion of purchasing power without hampering your overall returns.”
211. “If the investor is to rely chiefly on the advice of others in handling his funds, then either he must limit himself and his advisers strictly to standard, conservative, and even unimaginative forms of investment, or he must have an unusually intimate and favorable knowledge of the person who is going to direct his funds into other channels. But if the ordinary business or professional relationship exists between the investor and his advisers, he can be receptive to less conventional suggestions only to the extent that he himself has grown in knowledge and experience and has therefore become competent to pass independent judgment on the recommendations of others. He has then passed from the category of defensive or unenterprising investor into that of aggressive or enterprising investor.”
212. “Knowledge is only one ingredient on arriving at a stock's proper price. The other ingredient, fully as important as information is sound judgment.”
213. “invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.3”
214. “The words “large” and “prominent” carry the notion of substantial size combined with a leading position in the industry. Such companies are often referred to as “primary”; all other common stocks are then called “secondary,” except that growth stocks are ordinarily placed in a separate class by those who buy them as such. To supply an”
215. 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. (pg. 526)
216. “you must deliberately protect yourself against serious losses; you must aspire to “adequate,” not extraordinary, performance.”
217. “The idea of measuring investment risks by price fluctuations is repugnant to me, for the very reason that it confuses what the stock market says with what actually happens to the owners' stake in the business.”
218. “Successful investing is about managing risk, not avoiding it.” Benjamin Graham
219. “It is interesting to see how unpopular companies can become, merely because their immediate prospects are clouded in the speculative mind.”
220. Successful investing is about managing risk, not avoiding it. (pg. 535)
221. The sillier the market’s behaviour, the greater the opportunity for the business like investor. (pg. ix)
222. “When changes in the market level have raised the common-stock component to, say, 55%, the balance would be restored by a sale of one-eleventh of the stock portfolio and the transfer of the proceeds to bonds. Conversely, a fall in the common-stock proportion to 45% would call for the use of one-eleventh of the bond fund to buy additional equities.”
223. “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.”
224. The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioural discipline that are likely to get you where you want to go. (pg. 220)
225. “I think this business of greed -- the excessive hopes and fears and so on -- will be with us as long as there will be people.”
226. “Many mistakes have been made in buying growth stocks on the theory that the future will duplicate the past.”
227. “Instead of listening to Hoffman and his lapdog analysts, traders should have heeded the honest warning in Commerce One’s annual report for 1999: “We have never been profitable. We expect to incur net losses for the foreseeable future and we may never be profitable.”
228. “I am skeptical about stock market forecasting by anybody, and particularly by bankers.”
229. “There is a close logical connection between the concept of a safety margin and the principle of diversification. One is correlative with the other. Even with a margin in the investor’s favor, an individual security may work out badly. For the margin guarantees only that he has a better chance for profit than for loss—not that loss is impossible. But as the number of such commitments is increased the more certain does it become that the aggregate of the profits will exceed the aggregate of the losses. That is the simple basis of the insurance-underwriting business.”
230. “Discipline is the bridge between goals and accomplishment.”
231. “Participation in the stock market is not limited to the experienced, the conservative, nor even the intelligent. It is a game at which any number of people may play. And as the market level rises, the quantity of players grows rapidly and their quality diminishes somewhat in proportion.”
232. “Read the notes.Never buy a stock without reading the footnotes to the financial statements in the annual report. Usually labeled “summary of significant accounting policies,” one key note describes how the company recognizes revenue, records inventories, treats installment or contract sales, expenses its marketing costs, and accounts for the other major aspects of its business.7 In the other footnotes, watch for disclosures about debt, stock options, loans to customers, reserves against losses, and other “risk factors” that can take a big chomp out of earnings”
233. “Our one recommendation is that all investors should be wary of new issues—which means, simply, that these should be subjected to careful examination and unusually severe tests before they are purchased. There are two reasons for this double caveat. The first is that new issues have special salesmanship behind them, which calls therefore for a special degree of sales resistance.* The second is that most new issues are sold under “favorable market conditions”—which means favorable for the seller and consequently less favorable for the buyer.† The effect of these considerations becomes steadily more important as we go down the scale from the highest-quality bonds through second-grade senior issues to common-stock flotations at the bottom.”
234. “The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.”
235. “Today’s investor is so concerned with anticipating the future that he is already paying handsomely for it in advance. Thus what he has projected with so much study and care may actually happen and still not bring him any profit. If it should fail to materialize to the degree expected he may in fact be faced with serious temporary and perhaps even permanent loss.” P 345”
236. “The investor’s chief problem – and even his worst enemy – is likely to be himself.”
237. “In the financial markets, hindsight is forever 20/20, but foresight is legally blind.”
238. “Santayana: “Those who do not remember the past are condemned to repeat it.”
239. Even the intelligent investor is likely to need considerable will power to keep from following the crowd. (pg. 197)
240. “To have a true investment, there must be a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.”
241. “Is the stock market riskier today than two years ago simply because prices are higher? The answer is no.” But the answer is yes. It always has been. It always will be.”
242. “By pouring continuous data about stocks into bars and barbershops, kitchens and cafés, taxicabs and truck stops, financial websites and financial TV turned the stock market into a nonstop national video game. The public felt more knowledgeable about the markets than ever before. Unfortunately, while people were drowning in data, knowledge was nowhere to be found. Stocks became entirely decoupled from the companies that had issued them—pure abstractions, just blips moving across a TV or computer screen. If the blips were moving up, nothing else mattered.”
243. “There is no room in this philosophy for a middle ground, or a series of gradations, between the passive and aggressive status. Many,”
244. Thousands of people have tried, and the evidence is clear: The more you trade, the less you keep. (pg. 149)
245. “introduce them to one of the most fascinating and valuable little volumes in existence. It is Standard & Poor’s Stock Guide, published monthly, and made available to the general public under annual subscription. In addition many brokerage firms distribute the Guide to their clients”
246. “Graham’s guideline of owning between 10 and 30 stocks remains a good starting point for investors who want to pick their own stocks, but you must make sure that you are not overexposed to one industry.”
247. “These chaps start out reading Graham and Dodd and I'm sure most of them are quite impressed by it in business school. I take some malicious pleasure in saying it's the book on finance that's been read by more people and disregarded by more people than any other that I know of.”
248. “High valuations entail high risks.”
249. “We know from experience that eventually the market catches up with value. It realizes it in one way or another.”
250. “The schoolteacher asks Billy Bob: "If you have 12 sheeps and one jumps over the fence, how many sheeps do you have left?"
251. “whether a firm’s senior executives and directors have been buying or selling shares. There can be legitimate reasons for an insider to sell—diversification, a bigger house, a divorce settlement—but repeated big sales are a bright red flag. A manager can’t legitimately be your partner if he keeps selling while you’re buying. Are they managers or promoters?
252. “Growth stocks are worth buying when their prices are reasonable, but when their price/earnings ratios go much above 25 or 30 the odds get ugly:”
253. Before you place your financial future in the hands of an adviser, it’s imperative that you find someone who not only makes you comfortable but whose honesty is beyond reproach. (pg. 274)
254. “The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bring to bear on his task. The minimum return goes to our passive investor, who wants both safety and freedom from concern. The maximum return would be realized by the alert and enterprising investor who exercises maximum intelligence and skill.”
255. “Imagine that in some private business you own a small share that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly.”
256. “The best values today are often found in the stocks that were once hot and have since gone cold.” Benjamin Graham
257. “All experienced investors know that earning power exerts a far more potent influence over stock prices than does property value.”
258. “The investor should impose some limit on the price he will pay for an issue in relation to its average earnings over, say, the past seven years. We suggest that this limit be set at 25 times such average earnings, and not more than 20 times those of the last twelve-month period.”
259. 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. (pg. 207)
260. “All of human unhappiness comes from one single thing: not knowing how to remain at rest in a room. —Blaise Pascal”
261. “As Graham puts it, “while enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.”
262. It is absurd to think that the general public can ever make money out of market forecasts. (pg. 190)
263. “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.”
264. “If a common stock is a good investment it is also a good speculation.”
265. “Investment is most intelligent when it is most businesslike.” Benjamin Graham
266. “guiding rule that the investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequent inverse range of between 75% and 25% in bonds.”
267. “Instead, let’s tune out the noise and think about future returns as Graham might. The stock market’s performance depends on three factors: real growth (the rise of companies’ earnings and dividends) inflationary growth (the general rise of prices throughout the economy) speculative growth—or decline (any increase or decrease in the investing public’s appetite for stocks)”
268. “The trouble with market forecasting is not that it is done by unintelligent and unskillful people. Quite to the contrary, the trouble is that it is done by so many really expert people that their efforts constantly neutralize each other, and end up almost exactly in zero.”
269. The intelligent investor is a realist who sells to optimists and buys from pessimists. (pg. xiii)
270. “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.”
271. To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. (pg. ix)
272. “Though business conditions may change, corporations and securities may change, and financial institutions and regulations may change, human nature remains 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.”
273. “What else should you watch for? Most fund buyers look at past performance first, then at the manager’s reputation, then at the riskiness of the fund, and finally (if ever) at the fund’s expenses. The intelligent investor looks at those same things—but in the opposite order.”
274. “Most of the time, the market is mostly accurate in pricing most stocks. Millions of buyers and sellers haggling over price do a remarkably good job of valuing companies—on average. But sometimes, the price is not right; occasionally, it is very wrong indeed. And at such times, you need to understand Graham’s image of Mr. Market, probably the most brilliant metaphor ever created for explaining how stocks can become mispriced.1 The manic-depressive Mr. Market does not always price stocks the way an appraiser or a private buyer would value a business. Instead, when stocks are going up, he happily pays more than their objective value; and, when they are going down, he is desperate to dump them for less than their true worth.”
275. “Anh chẳng đúng cũng chẳng sai, chỉ bởi vì đám đông không đồng ý với anh!”
276. “In our view the search for these would not be worth the investor’s effort unless he could hope to add, say, 5% before taxes to the average annual return from the stock portion of his portfolio.”
277. The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is cause for concern. (pg. 20)
278. “An offering of New Housing issues in July 1971 yielded as high as 5.8%, free from both Federal and state taxes, while an issue of (taxable) New Community debentures sold in September”
279. “... Bond selection is primarily a negative art. It is a process of exclusion and rejection, rather than of search and acceptance.”
280. “Mr. Market’s job is to provide you with prices; your job is to decide whether it is to your advantage to act on them. You no not have to trade with hime just because he constantly begs you to.”
281. “Do not enter upon an operation—”
282. “Please do not forget that as the common stock level advances, the advantages of common stocks appear to be more attractive and the basic need for owning them becomes more persuasive in everybody’s reasoning. Yet in fact, common stocks undoubtedly become riskier as the price advances, and thus the risk increases as the widespread acceptance of common stock develops.”
283. “the art of successful investment lies first in the choice of those industries that are most likely to grow in the future and then in identifying the most promising companies in these industries.”
284. “My own opinion is that the selection of individual securities is a matter partly of a special kind of judgment and insight, and partly of a good deal of security analysis training.”
285. “Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook. More than that, some speculation is necessary and unavoidable, for in many common-stock situations there are substantial possibilities of both profit and loss, and the risks therein must be assumed by someone.* There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are: (1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose.”
286. “The ideal way to dollar-cost average is into a portfolio of index funds, which own every stock or bond worth having. That way, you renounce not only the guessing game of where the market is going but which sectors of the market—and which particular stocks or bonds within them—will do the best.”
287. “If the relative stability of general business and corporate profits produces an unlimited enthusiasm and demand for common stocks, then it must eventually produce instability in stock prices.”
288. “To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.”
289. “Human felicity is produc’d not so much by great Pieces of good Fortune that seldom happen, as by little Advantages that occur every day. —Benjamin Franklin”
290. “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioural discipline that are likely to get you where you want to go.”
291. “But the intelligent investor has no interest in being temporarily right. To reach your long-term financial goals, you must be sustainably and reliably right.”
292. “Besides a cool name and a hot stock, what did Red Hat’s investors get? Over the nine months ending November 30, the company produced $13 million in revenues, on which it ran a net loss of $9 million.13 Red Hat’s business was barely bigger than a street-corner delicatessen—and a lot less lucrative. But traders, inflamed by the words “software” and “Internet,” drove the total value of Red Hat’s shares to $21.3 billion by December 9.”
293. “We should advise rather strongly against the initiation of a new dollar-averaging plan at the late 1964 levels, since many investors would not have the stamina to pursue such a scheme if the results soon after initiation should appear highly unfavorable.”
294. “The work of a financial analyst falls somewhere in the middle between that of a mathematician and of an orator.”
295. “With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles, but we cling tenaciously and unquestioningly to our prejudices. ”
296. “The Numbers Game Even Graham would have been startled by the extent to which companies and their accountants pushed the limits of propriety in the past few years. Compensated heavily through stock options, top executives realized that they could become fabulously rich merely by increasing their company’s earnings for just a few years running.1 Hundreds of companies violated the spirit, if not the letter, of accounting principles—turning their financial reports into gibberish, tarting up ugly results with cosmetic fixes, cloaking expenses, or manufacturing earnings out of thin air.”
297. “People without experience or superior ability may make a lot of money fast in the stock market, but they cannot keep what they make, and most of them will end up as net losers.”
298. Mr. Market does not always price stocks the way an appraiser or a private buyer would value a business. Instead, when stocks are going up, he happily pays more than their objective value; and, when they are going down, he is desperate to dump them for less than their true worth. (pg. 213)
299. “Instead, calculate a stock’s price/earnings ratio yourself, using Graham’s formula of current price divided by average earnings over the past three years.”
300. “Astute observers of corporate balance sheets are often the first to see business deterioration”
301. “justify our continuing them. Hence from 1939 on our operations were limited to “selfliquidating” situations, related hedges, working-capital bargains, and a few control operations. Each of these classes gave us quite consistently satisfactory results from then on, with the special feature that the related hedges turned in good profits in the bear markets when our “undervalued issues” were not doing so well.”
302. Always remember that market quotations are there for convenience, either to be taken advantage of or to be ignored. (pg. 206)
303. “Of course, wonders can be accomplished with the right individual selections, bought at the right levels, and later sold after a huge rise and before the probable decline. But the average investor can no more expect to accomplish this than to find money growing on trees.”
304. “Los expertos no disponen de formas fiables de elegir y concentrar sus inversiones en las empresas más prometedoras de los sectores más prometedores.”
305. “Tradition, sentiment, vague generalizations, unsubstantiated rumors, can never be made the basis of sound investment or intelligent speculation. Now and then large profits are realized on no better foundation -- merely proving that sometimes luck laughs at logic.”
306. “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. 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. The future value of every investment is a function of its present price. The higher the price you pay, the lower your return will be.”
307. “Investors venerate their old gods long after their divinity is departed.”
308. “Readers of this book, however intelligent and knowing, could scarcely expect to do a better job of portfolio selection than the top analysts of the country. But if it is true that a fairly large segment of the stock market is often discriminated against or entirely neglected in the standard analytical selections, then the intelligent investor may be in a position to profit from the resultant undervaluations.”
309. “Most people sell stocks at low prices not because they have to but because they are scared.”
310. “Antes de lanzarse a una incursión de ese tipo, el inversor debería estar seguro de sí mismo y de sus asesores, en especial a la hora de determinar si tienen una clara concepción de las diferencias existentes entre la inversión y la especulación y entre el precio de mercado y el valor subyacente.”
311. “You’ve got to be careful if you don’t know where you’re going, ’cause you might not get there. —Yogi Berra”
312. “Never mingle your speculative and investment operations in the same account, nor in any part of your thinking.”
313. “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.”1 Note that investing, according to Graham, consists equally of three elements:”
314. “The "new-era" doctrine - that "good" stocks (or "blue chips") were sound investments regardless of how high the price paid for them - was at the bottom only a means of rationalizing under the title of "investment" the well-nigh universal capitulation to the gambling fever/”
315. “On the other hand, while the investment funds had substantial investments and substantial gains in IBM, the combination of its apparently high price and the impossibility of being certain about its rate of growth prevented them from having more than, say, 3% of their funds in this wonderful performer. Hence the effect of this excellent choice on their overall results was by no means decisive. Furthermore, many—if not most—of their investments in computer-industry companies other than IBM appear to have been unprofitable. From these two broad examples we draw two morals for our readers: Obvious prospects for physical growth in a business do not translate into obvious profits for investors. The experts do not have dependable ways of selecting and concentrating on the most promising companies in the most promising industries.”
316. “Usually labeled “summary of significant accounting policies,” one key note describes how the company recognizes revenue, records inventories, treats installment or contract sales, expenses its marketing costs, and accounts for the other major aspects of its business.”
317. “Buy cheap and sell dear.”
318. 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. (pg. 31)
319. “It has long been the prevalent view that the art of successful investment lies first in the choice of those industries that are most likely to grow in the future and then in identifying the most promising companies in these industries.”
320. “Al contrario, este libro le enseñará tres lecciones muy eficaces: — Cómo puede reducir al mínimo las probabilidades de sufrir pérdidas irreversibles. — Cómo puede aumentar al máximo las probabilidades de conseguir beneficios sostenibles. — Cómo puede controlarse el comportamiento autodestructivo que impide que la mayor parte de los inversores aprovechen todo su potencial.”
321. “In the last 20 years the “profitable reinvestment” theory has been gaining ground. The better the past record of growth, the readier investors and speculators have become to accept a low-pay-out policy. So much is this true that in many cases of growth favorites the dividend rate—or even the absence of any dividend—has seemed to have virtually no effect on the market price.”
322. “Walter Lippmann spoke of men who plant trees that other men will sit under. Ben Graham was such a man.”
323. “To see why temporarily high returns don’t prove anything, imagine that two places are 130 miles apart. If I observed the 65 mph speed limit, I can drive that distance in two hours. But if I drive 130 mph, I can get there in one hour. If I try this and survive, am I “right”? Should you be tempted to try it, too, because you hear me bragging that it “worked?” Flashy gimmicks for beating the market are much the same: in short streaks, so as long as your luck holds out, they work. Over time, they will get you killed.”
324. “1. There should be adequate though not excessive diversification. This might mean a minimum of ten different issues and a maximum of about thirty.†”
325. “you will never know the joy of success until you have experience the joy of failure.”
326. “Objective tests of managerial ability are few and far from scientific. In most cases the investor must rely upon a reputation which may or may not be deserved.”
327. “The intelligent investor dreads a bull market, since it makes stocks more costly to buy. And conversely (so long as you keep enough cash on hand to meet your spending needs), you should welcome a bear market, since it puts stocks back on sale.”
328. “Although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go.”
329. “The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.”
330. “In June 1949 the S & P composite index sold at only 6.3 times the applicable earnings of the past 12 months; in March 1961 the ratio was 22.9 times. Similarly, the dividend yield on the S & P index had fallen from over 7% in 1949 to only 3.0% in 1961, a contrast heightened by the fact that interest rates on high-grade bonds had meanwhile risen from 2.60% to 4.50%. This is certainly the most remarkable turnabout in the public’s attitude in all stock-market history.”
331. “The average well-selected secondary company may be fully as promising as the average industrial leader. What the smaller concern lacks in inherent stability it may readily make up in superior possibilities of growth. Consequently it may appear illogical to many readers to term “unintelligent” the purchase of such secondary issues at their full “enterprise value.” We think that the strongest logic is that of experience. Financial history says clearly that the investor may expect satisfactory results, on the average, from secondary common stocks only if he buys them for less than their value to a private owner, that is, on a bargain basis.”
332. “Since the profits that companies can earn are finite, the price that investors should be willing to pay for stocks must also be finite.”
333. To see how much a company is truly earning on the capital it deploys in its businesses, look beyond EPS to Return on Invested Capital (ROIC). (pg. 398)
334. No statement is more true and better applicable to Wall Street than the famous warning of Santayana: “Those who do not remember the past are condemned to repeat it”. (pg. 1)
335. “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
336. “If your investment horizon is long—at least 25 or 30 years—there is only one sensible approach: Buy every month, automatically, and whenever else you can spare some money. The single best choice for this lifelong holding is a total stock-market index fund. Sell only when you need the cash”
337. “The Best Defense is a Good Offense”
338. The determining trait of the enterprising (or active, or aggressive) investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than the average. (pg. 6)
339. “One of Graham’s most powerful insights is this: “The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.” What does Graham mean by those words “basic advantage”? He means that the intelligent individual investor has the full freedom to choose whether or not to follow Mr. Market. You have the luxury of being able to think for yourself.5”
340. “You should always remember, in the words of psychologist Paul Slovic, that "risk is brewed from an equal dose of two ingredients - probabilities and consequences." 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.”
341. “Without a saving faith in the future, no one would ever invest at all.”
342. “Speculators often prosper through ignorance.”
343. “One technique that can be helpful: See which leading professional money managers own the same stocks you do. If one or two names keep turning up, go to the websites of those fund companies and download their most recent reports. By seeing which other stocks these investors own, you can learn more about what qualities they have in common; by reading the managers’ commentary, you may get ideas on how to improve your own approach.”
344. “When it comes to statements about the future in the economic realm, none of us have knowledge in the scientific sense of the term. What we have is opinions and surmises -- let us hope, based upon adequate reflections and study.”
345. “Quotations fluctuate constantly, reacting often illogically to all sorts of temporary and even trivial influences.”
346. “Principle for the securities analyst: Nearly every issue might conceivably be cheap in one price range and dear in another.”
347. “And back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Sensing that the market was getting out of hand, the great physicist muttered that he “could calculate the motions of the heavenly bodies, but not the madness of the people.” Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price—and lost £20,000 (or more than $3 million in today’s money). For the rest of his life, he forbade anyone to speak the words “South Sea” in his presence. 4”
348. “Current earnings, future prospects, management, marketability are all factors more or less independent of assets which contribute their share to the intrinsic value.”
349. “Speculative operations are all concerned with changes in price. In some cases the emphasis is on price changes alone, and in other cases the emphasis is on changes in value which are expected to give rise to changes in price.”
350. “también existe la posibilidad más probable de que vayamos a ser testigos de otro gran aumento especulativo en el valor de mercado que no tenga una justificación real en los valores subyacentes.”
351. “These low-cost “ETFs” sometimes offer the only means by which an investor can gain entrée to a narrow market like, say, companies based in Belgium or stocks in the semiconductor industry. Other index ETFs offer much broader market exposure. However, they are generally not suitable for investors who wish to add money regularly, since most brokers will charge a separate commission on every new investment you make.”
352. High valuations entail high risks. (pg. 335)
353. “your brokerage costs, by trading rarely, patiently, and cheaply your ownership costs, by refusing to buy mutual funds with excessive annual expenses your expectations, by using realism, not fantasy, to forecast your returns7 your risk, by deciding how much of your total assets to put at hazard in the stock market, by diversifying, and by rebalancing your tax bills, by holding stocks for at least one year and, whenever possible, for at least five years, to lower your capital-gains liability and, most of all, your own behavior.”
354. Avoid second-quality issues in making up a portfolio unless they are demonstrable bargains. (pg. 389)
355. “The underlying factor here is the tendency of the security markets to undervalue issues that are involved in any sort of complicated legal proceedings. An old Wall Street motto has been: “Never buy into a lawsuit.” This may be sound advice to the speculator seeking quick action on his holdings. But the adoption of this attitude by the general public is bound to create bargain opportunities in the securities affected by it, since the prejudice against them holds their prices down to unduly low levels.*”
356. “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go. In the end, what matters isn’t crossing the finish line before anybody else but just making sure that you do cross it.8”
357. The most striking thing about Graham’s discussion of how to allocate your assets between stocks and bonds is that he never mentions the word “age”. (pg. 102)
358. “Unlike most people, many of the best professional investors first get interested in a company when its share price goes down, not up.”
359. “In late 1998, the stock of a tiny, rarely traded building-maintenance company, Temco Services, nearly tripled in a matter of minutes on record-high volume. Why? In a bizarre form of financial dyslexia, thousands of traders bought Temco after mistaking its ticker symbol, TMCO, for that of Ticketmaster Online (TMCS), an Internet darling whose stock began trading publicly for the first time that day.8 Oscar Wilde joked that a cynic “knows the price of everything, and the value of nothing.”
360. “The fault, dear investor, is not in our stars- and no in our stocks- but in ourselves...”
361. “It is absurd to think that the general public can ever make money out of market forecasts.”
362. “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.”
363. “Asset elephantiasis. When a fund earns high returns, investors notice—often pouring in hundreds of millions of dollars in a matter of weeks. That leaves the fund manager with few choices—all of them bad. He can keep that money safe for a rainy day, but then the low returns on cash will crimp the fund’s results if stocks keep going up. He can put the new money into the stocks he already owns—which have probably gone up since he first bought them and will become dangerously overvalued if he pumps in millions of dollars more. Or he can buy new stocks he didn’t like well enough to own already—but he will have to research them from s”
364. “And I suspect that Graham and Dodd have been ignored by those who suffer from the misconception that trying to make serious money requires that one take serious risks.”
365. “Its rock-bottom overhead—operating expenses of 0.2% annually, and yearly trading costs of just 0.1%—give the index fund an insurmountable advantage. If stocks generate, say, a 7% annualized return over the next 20 years, a low-cost index fund like Vanguard Total Stock Market will return just under 6.7%. (That would turn a $10,000 investment into more than $36,000.) But the average stock fund, with its 1.5% in operating expenses and roughly 2% in trading costs, will be lucky to gain 3.5% annually. (That would turn $10,000 into just under $20,000—or nearly 50% less than the result from the index fund.)”
366. Calculate a stock’s price/earnings ratio yourself, using Graham’s formula of current price divided by average earnings over the past three years. (pg. 374)
367. “After all, the whole point of investing is not to earn more money than average, but to earn enough money to meet your own needs.”
368. “The happiness of those who want to be popular depends on others; the happiness of those who seek pleasure fluctuates with moods outside their control; but the happiness of the wise grows out of their own free acts. —Marcus Aurelius”
369. “Todo el mundo debe conservar parte de su patrimonio en el seguro refugio del dinero en metálico.”
370. “Do not let anyone else run your business, unless (1) you can supervise his performance with adequate care and comprehension or (2) you have unusually strong reasons for placing implicit confidence in his integrity and ability.”
371. There is a close logical connection between the concept of a safety margin and the principle of diversification. (pg. 518)
372. “For indisputably skilled investors like Warren Buffett, wide diversification would be foolish, since it would water down the concentrated force of a few great ideas. But for the typical fund manager or individual investor, not diversifying is foolish, since it is so difficult to select a limited number of stocks that will include most winners and exclude most losers. As you own more stocks, the damage any single loser can cause will decline, and the odds of owning all the big winners will rise. The ideal choice for most investors is a total stock market index fund, a low-cost way to hold every stock worth owning.”
373. “Today's investors have forgotten Graham's message. They put most of their effort into buying a stock, a little into selling it - but none into owning it. "Certainly," Graham reminds us, "there is just as much reason to exercise care and judgment in being as in becoming a stockholder.”
374. “They ignored Graham’s warning that “the really dreadful losses” always occur after “the buyer forgot to ask ‘How much?’” Most painfully of all, by losing their self-control just when they needed it the most, these people proved Graham’s assertion that “the investor’s chief problem—and even his worst enemy—is likely to be himself.”
375. “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
376. “The broad pattern of market action in the past is the best guide to the future -- but it is not an infallible guide.”
377. “There’s no good reason ever to pay more than these levels of annual operating expenses, by fund category: Taxable and municipal bonds: 0.75% U.S. equities (large and mid-sized stocks): 1.0% High-yield (junk) bonds: 1.0% U.S. equities (small stocks): 1.25% Foreign stocks: 1.50%9”
378. “Streisand, the day-trading diva, personified the way people abuse Lynch’s teachings. In 1999 she burbled, “We go to Starbucks every day, so I buy Starbucks stock.” But the Funny Girl forgot that no matter how much you love those tall skinny lattes, you still have to analyze Starbucks’s financial statements and make sure the stock isn’t even more overpriced than the coffee.”
379. “Analysis is concerned primarily with values which are supported by the facts and not with those which depend largely upon expectations.”
380. “plant trees that other men will sit under.”
381. “Hence if the investor was in a maximum tax bracket higher than 30% he would have a net saving after taxes by choosing the municipal bonds; the opposite, if his maximum tax was less than 30%.”
382. “To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.” Benjamin Graham
383. “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.”
384. “Jak říká analytik finančního poradenství Robert Veres: "Má-li finanční poradce stát na obrané linii mezi vámi a vašimi nejhoršími impulzivními sklony, musí mít k dispozici systémy, které vám oběma pomůžou se s nimi vyrovnat." Mezi tyto systémy patří zejména:
385. “The problem of investment in common stocks is either to insulate yourselves from the speculative influences, or else to adjust your investment policy so that you can take advantage of the speculative fluctuations that are imposed upon the basic investment quality of common stocks.”
386. “While enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street, it almost invariably leads to disaster.”
387. “In a speculative market, what counts is imagination and not analysts.”
388. “Wall Street has a beautiful collection of very ancient and often very incorrect traditions.”
389. “Buy when most people, including experts, are pessimistic, and sell when they are actively optimistic.” Benjamin Graham
390. “Successful investing is about managing risk, not avoiding it.”
391. “something foolish, something creative and something generous”
392. “Rising prices allow Uncle Sam to pay off his debts with dollars that have been cheapened by inflation. Completely eradicating inflation runs against the economic self-interest of any government that regularly borrows money.”
393. “Weighing the evidence objectively, the intelligent investor should conclude that IPO does not stand only for ‘initial public offering.’ More accurately, it is also shorthand for: It’s Probably Overpriced, Imaginary Profits Only, Insiders’ Private Opportunity, or Idiotic, Preposterous, and Outrageous.”
394. “Take the five stocks in the Dow Jones Industrial Average with the lowest stock prices and highest dividend yields. Discard the one with the lowest price. Put 40% of your money in the stock with the second-lowest price. Put 20% in each of the three remaining stocks. One year later, sort the Dow the same way and reset the portfolio according to steps 1 through 4. Repeat until wealthy.”
395. “great company is not a great investment if you pay too much for the stock. The more a stock has gone up, the more it seems likely to keep going up. But that instinctive belief is flatly contradicted by a fundamental law of financial physics: The bigger they get, the slower they grow. A $1-billion company can double its sales fairly easily; but where can a $50-billion company turn to find another $50 billion in business? Growth stocks are worth buying when their prices are reasonable, but when their price/earnings ratios go much above 25 or 30 the odds get ugly:”
396. “In the halcyon days of prosperity, the investor is satisfied with increased dividends and a rising market, and cares very little about dry statistics.”
397. “The few good annuities are bought, not sold; if an annuity produces fat commissions for the seller, chances are it will produce meager results for the buyer. Consider only those you can buy directly from providers with rock-bottom costs like Ameritas, TIAA-CREF, and Vanguard.”
398. “If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.”
399. “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.”
400. “December 20, 1999, Juno Online Services unveiled a trailblazing business plan: to lose as much money as possible, on purpose. Juno announced that it would henceforth offer all its retail services for free—no charge for e-mail, no charge for Internet access—and that it would spend millions of dollars more on advertising over the next year. On this declaration of corporate hara-kiri, Juno’s stock roared up from $16.375 to $66.75 in two days.6”
401. “On the other hand, investing is a unique kind of casino—one where you cannot lose in the end, so long as you play only by the rules that put the odds squarely in your favor.”
402. “No matter how complete and accurate an analysis may be, there is always a possibility either of some new condition arising to belie your conclusions, or else of the market refusing to act in accordance with your just expectations.”
403. “He should never buy a stock because it has gone up or sell one because it has gone down. He would not be far wrong if this motto read more simply: “Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop.”
404. “There are two requirements for success in Wall Street. One, you have to think correctly; and secondly, you have to think independently.”
405. “The wisdom god, Woden, went out to the king of the trolls, got him in an armlock, and demanded to know of him how order might triumph over chaos. “Give me your left eye,” said the troll, “and I’ll tell you.” Without hesitation, Woden gave up his left eye. “Now tell me.” The troll said, “The secret is, ‘Watch with both eyes!’” —John Gardner”
406. “It must never be forgotten that a stockholder is an owner of the business and an employer of its officers. He is entitled not only to ask legitimate questions but also to have them answered, unless there is some persuasive reason to the contrary.”
407. “An industrial company’s finances are not conservative unless the common stock (at book value) represents at least half of the total capitalization, including all bank debt.3 For a railroad or public utility the figure should be at least 30%.”
408. “The true investor scarcely ever is forced 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.* Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.†”
409. “Graham announces from the start that this book will not tell you how to beat the market. No truthful book can.”
410. “La felicidad de quienes ansían la popularidad depende de los demás; la felicidad de los que persiguen el placer fluctúa con estados de ánimo que no pueden controlar; sin embargo, la felicidad de los sabios surge de sus propios actos libres. Marco Aurelio”
411. “Lynch insists that no one should ever invest in a company, no matter how great its products or how crowded its parking lot, without studying its financial statements and estimating its business value.”
412. “The worth of a business is measured not by what has been put into it, but by what can be taken out of it.”
413. “It may be a fair generalization to assert that the top levels of most "normal" bull markets are characterized by a tendency to equate stock risks with bond risks.”
414. “The market’s behavior in the past 20 years has not followed the former pattern, nor obeyed what once were well-established danger signals, nor permitted its successful exploitation by applying old rules for buying low and selling high. Whether the old, fairly regular bull-and-bear-market pattern will eventually return we do not know. But it seems unrealistic to us for the investor to endeavor to base his present policy on the classic formula—i.e., to wait for demonstrable bear-market levels before buying any common stocks. Our recommended policy has, however, made provision for changes in the proportion of common stocks to bonds in the portfolio, if the investor chooses to do so, according as the level of stock prices appears less or more attractive by value standards.”
415. “We shall dismiss these with the observation that their work does not concern “investors” as the term is used in this book.”
416. “But there are hundreds of closed-end bond funds, with especially strong choices available in the municipal-bond area. When these funds trade at a discount, their yield is amplified and they can be attractive, so long as their annual expenses are below the thresholds listed above.”
417. “Cuando dejas todo al albur del azar, de repente tu suerte se agota. Pat Riley, entrenador de baloncesto”
418. “Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop.”
419. “It is our view that stock-market timing cannot be done, with general success, unless the time to buy is related to an attractive price level, as measured by analytical standards. Similarly,”
420. “In all of these instances he appears to be concerned with the intrinsic value of the security and more particularly with the discovery of discrepancies between the intrinsic value and the market price.”
421. “You are neither right nor wrong because people agree with you.”
422. “An elementary requirement for the intelligent investor is an ability to resist the blandishments of salesmen offering new common-stock issues during bull markets.”
423. “Be skeptical of the popular reasoning behind any spectacular move in the stock market -- but don't be too sure this reasoning is wrong.”
424. “I have little confidence even in the ability of analysts, let alone untrained investors, to select common stocks that will give better than average results. Consequently, I feel that the standard portfolio should be to duplicate, more or less, the DJIA.”
425. “What the corporate tax actually works out as is a dilution of the stock equities. It is the equivalent of a payment of a stock dividend which goes to the government instead of to the stockholders.”
426. “Considering how calamitously wrong the experts have been on the stock market, why should we believe them now? That's not what the intelligent investor would do.”
427. “The essence of investment management is the management of risks, not the management of returns.”
428. “Finally, once a fund becomes successful, its managers tend to become timid and imitative. As a fund grows, its fees become more lucrative—making its managers reluctant to rock the boat. The very risks that the managers took to generate their initial high returns could now drive investors away—and jeopardize all that fat fee income. So the biggest funds resemble a herd of identical and overfed sheep, all moving in sluggish lockstep, all saying “baaaa” at the same time. Nearly every growth fund owns Cisco and GE and Microsoft and Pfizer and Wal-Mart—and in almost identical proportions. This behavior is so prevalent that finance scholars simply call it herding.4 But by protecting their own fee income, fund managers compromise their ability to produce superior returns for their outside investors.”
429. “If we really knew what the future will bring that is all we would have to know; but since stock market people can only guess the future and since they have the embarrassing habit of guessing wrongly, it seems best not to lay too much stress upon forecasts.”
430. “People who invest make money for themselves; people who speculate make money for their brokers.”
431. “It is the mark of an educated mind to expect that amount of exactness which the nature of the particular subject admits. It is equally unreasonable to accept merely probable conclusions from a mathematician and to demand strict demonstration from an orator.”
432. “Lynch’s rule—“You can outper-forms the experts if you use your edge by investing in companies or industries you already understand”—isn’t totally implausible, and thousands of investors have profited from it over the years. But Lynch’s rule can work only if you follow its corollary as well: “Finding the promising company is only the first step. The next step is doing the research.” To his credit, Lynch insists that no one should ever invest in a company, no matter how great its products or how crowded its parking lot, without studying its financial statements and estimating its business value. Unfortunately, most stock buyers have ignored that part.”
433. “The intelligent investor is likely to need considerable will power to keep from following the crowd.”
434. “Discrepancies -- and hence opportunities -- in securities originate most often when events move faster than quotations.”
435. “Margin of Safety” is the famous term coined by Ben Graham in Security Analysis. In simple terms, an asset worth $100 and bought at $80 has a better Margin of Safety than the same asset purchased at $95.
436. “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.” Benjamin Graham
437. “Mortgage securities. Pooled together from thousands of mortgages around the United States, these bonds are issued by agencies like the Federal National Mortgage Association (“Fannie Mae”) or the Government National Mortgage Association (“Ginnie Mae”). However, they are not backed by the U.S. Treasury, so they sell at higher yields to reflect their greater risk. Mortgage bonds generally underperform when interest rates fall and bomb when rates rise. (Over the long run, those swings tend to even out and the higher average yields pay off.) Good mortgage-bond funds are available from Vanguard, Fidelity, and Pimco. But if a broker ever tries to sell you an individual mortgage bond or “CMO,” tell him you are late for an appointment with your proctologist.”
438. “All things excellent are as difficult as they are rare.”
439. “No prediction -- whether of a repetition of past patterns or of a complete break with past patterns -- can be proved in advance to be right.”
440. “We added that the stock component should carry a fair degree of protection against a loss of purchasing power caused by large-scale inflation.”
441. “To have a true investment, there must be a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.” Benjamin Graham
442. “It’s time for everyone to acknowledge that the term “long-term investor” is redundant. A long-term investor is the only kind of investor there is. Someone who can’t hold on to stocks for more than a few months at a time is doomed to end up not as a victor but as a victim.”
443. “I think the future of equities will be roughly the same as their past; in particular, common stock purchases will prove satisfactory when made at appropriate price levels.”
444. “The only sound distinction in investment policies for one type of investor or another is based not on his financial position but on his financial competence and financial preparation.”
445. “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.” Benjamin Graham
446. “... the value of the pledged property is vitally dependent on the earning power of the enterprise.”
447. “Investment must always consider the price as well as the quality of the security.”
448. Investment is most intelligent when it is most businesslike. (pg. 523)
449. “Even the intelligent investor is likely to need considerable willpower to keep from following the crowd.”—Benjamin Graham
450. “Each company should have a long record of continuous dividend payments. (All the issues in the Dow Jones Industrial Average met this dividend requirement in 1971.) To be specific on this point we would suggest the requirement of continuous dividend payments beginning at least in 1950.”
451. “If we assume that a very considerable amount of Wall Street activity must inevitably have elements of chance in it, then the sound idea would be to measure these chances as accurately as you can, and play the game in the direction of having the odds on your side.”
452. “As the Danish philosopher Søren Kierkegaard noted, life can only be understood backwards—but it must be lived forwards. Looking back, you can always see exactly when you should have bought and sold your stocks. But don’t let that fool you into thinking you can see, in real time, just when to get in and out.”
453. “Without a saving faith in the future, no one would ever invest at all. To be an investor, you must be a believer in a better tomorrow.” Benjamin Graham
454. “He would not be far wrong if this motto read more simply: "Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop." p43”
455. The purpose of this book is to supply, in the form suitable for laymen, guidance in the adoption and execution of an investment policy. (pg. 1)
456. “You must never delude yourself into thinking that you’re investing when you’re speculating. Speculating becomes mortally dangerous the moment you begin to take it seriously. You must put strict limits on the amount you are willing to wager.”
457. “Conversely, sound procedure would call for reducing the common-stock component below 50% when in the judgment of the investor the market level has become dangerously high.”
458. “simplicity of choice, and promise of satisfactory results, in terms of psychology as well as arithmetic.”
459. A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market. (pg. 371)
460. “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 earning power through economic changes or deterioration in management.”
461. “A recent article in the Financial Analysts Journal confirmed what other studies (and the sad experience of many investors) have shown: that the fastest-growing companies tend to overheat and flame out.”
462. “A cynic once told G. K. Chesterton, the British novelist and essayist, “Blessed is he who expecteth nothing, for he shall not be disappointed.” Chesterton’s rejoinder? “Blessed is he who expecteth nothing, for he shall enjoy everything.” (The Intelligent Investor Quotes)
463. “suggest that you rebalance every six months, no more and no less, on easy-to-remember dates like New Year’s and the Fourth of July.”
464. “Good mortgage-bond funds are available from Vanguard, Fidelity, and Pimco. But if a broker ever tries to sell you an individual mortgage bond or “CMO,” tell him you are late for an appointment with your proctologist.”
465. The value of any investment is, and always must be, a function of the price you pay for it. (pg. 83)
466. “If you have an opinion about the level of prices, it should be an opinion based upon your concept of the values of securities in relation to price, rather than on any prophecy or expectation of changes or of the continuance of a given moment.”
467. Only in the exceptional case, where the integrity and competence of the advisers have been thoroughly demonstrated, should the investor act upon the advice of others without understanding and approving the decision made. (pg. 271)
468. “In the old legend the wise men finally boiled down the history of mortal affairs into a single phrase: ‘This too will pass.’”
469. “The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.” Benjamin Graham
470. “The volume of credit depends upon three factors: the desire to borrow, the ability to lend and the desire to lend.” Benjamin Graham
471. “The intelligent investor realizes that stocks become more risky, not less, as their prices rise—and less risky, not more, as their prices fall. The intelligent investor dreads a bull market, since it makes stocks more costly to buy. And conversely (so long as you keep enough cash on hand to meet your spending needs), you should welcome a bear market, since it puts stocks back on sale.”
472. “The successful purchase of growth stocks requires two rather obvious conditions: First, that their prospect of growth be realized; and, second, that the market has not already pretty well discounted these growth prospects.”
473. “All of the above brings us back to our conclusion that the investor has no sound basis for expecting more than an average overall return of, say, 8% on a portfolio of DJIA-type common stocks purchased at the late 1971 price level. But even if these expectations should prove to be understated by a substantial amount, the case would not be made for an all-stock investment program.”
474. “while people were drowning in data, knowledge was nowhere to be found.”
475. “Good management produce a good average market price, and bad management produce bad market prices.” Benjamin Graham
476. “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.”
477. “But in other cases, making allowance for conversion rights—and the existence of stock-purchase warrants—can reduce the apparent earnings by half, or more.”
478. A great company is not a great investment if you pay too much for the stock. (pg. 181)
479. “It’s expensive to trade small lots of convertible bonds, and diversification is impractical unless you have well over $100,000 to invest in this sector alone. Fortunately, today’s intelligent investor has the convenient recourse of buying a low-cost convertible bond fund. Fidelity and Vanguard offer mutual funds with annual expenses comfortably under 1%, while several closed-end funds are also available at a reasonable cost (and, occasionally, at discounts to net asset value).4”
480. “The intelligent investor is a realist who sells to optimists and buys from pessimists. The future value of every investment is a function of its present price.”
481. “Groundbreaking new research in neuroscience shows that our brains are designed to perceive trends even where they might not exist. After an event occurs just two or three times in a row, regions of the human brain called the anterior cingulate and nucleus accumbens automatically anticipate that it will happen again. If it does repeat, a natural chemical called dopamine is released, flooding your brain with a soft euphoria. Thus, if a stock goes up a few times in a row, you reflexively expect it to keep going—and your brain chemistry changes as the stock rises, giving you a “natural high.” You effectively become addicted to your own predictions.”
482. “If you receive a 2% raise in a year when inflation runs at 4%, you will almost certainly feel better than you will if you take a 2% pay cut during a year when inflation is zero. Yet both changes in your salary leave you in a virtually identical position—2% worse off after inflation.”
483. 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. (pg. 6)
484. “At some point in its life, almost every stock is a bargain; at another time, it will be expensive. Although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go.”
485. “Obvious prospects for physical growth in a business do not translate into obvious profits for investors. The experts do not have dependable ways of selecting and concentrating on the most promising companies in the most promising industries.”
486. “The chief hazard of a careful common stock program is not that it may bring unexpected losses, but that its profits will turn the investor into a speculator greedy for quicker and bigger gains -- and therefore headed for ultimate disaster.”
487. “One example of a high-tech company that submits to a Graham type of analysis is Amazon.com. Though it does business exclusively on the Web, Amazon is essentially a retailer, and it may be evaluated in the same way as Wal-Mart, Sears, and so forth. The question, as always, is, does the business provide an adequate margin of safety at a given market price. For much of Amazon’s short life, the stock was wildly overpriced. But when the dot-com bubble burst, its securities collapsed. Buffett himself bought Amazon’s deeply discounted bonds after the crash, when there was much fearful talk that Amazon was headed for bankruptcy. The bonds subsequently rose to par, and Buffett made a killing.”
488. “Looking back, you can always see exactly when you should have bought and sold your stocks. But don’t let that fool you into thinking you can see, in real time, just when to get in and out. 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.5”
489. “then that it was by far the best book about investing ever written. I still think it is. To invest successfully over a”
490. The intelligent investor gets interested in big growth stocks not when they are at their most popular – but when something goes wrong. (pg. 183)
491. “I quickly convinced myself that the true key to material happiness lay in a modest standard of living which could be achieved with little difficulty under almost all economic conditions”—the margin-of-safety idea applied to personal finance.21”
492. “don’t invest in only one stock—or even just a handful of different stocks. Unless you are not willing to spread your bets, you shouldn’t bet at all. Graham’s guideline of owning between 10 and 30 stocks remains a good starting point for investors who want to pick their own stocks, but you must make sure that you are not overexposed to one industry.”
493. “Hold an index fund for 20 years or more, adding new money every month, and you are all but certain to outper-forms the vast majority of professional and individual investors alike. Late in his life, Graham praised index funds as the best choice for individual investors, as does Warren Buffett.6”
494. “My experience leads me to predict that the action of the market will govern the investor's choice as to probable future growth rates, rather than vice-versa.”
495. “That’s because whenever we are too close to someone or something, we take our beliefs for granted, instead of questioning them as we do when we confront something more remote. The more familiar a stock is, the more likely it is to turn a defensive investor into a lazy one who thinks there’s no need to do any homework. Don’t let that happen to you.”
496. “The intelligent investor realizes that stocks become more risky, not less, as their prices rise—and less risky, not more, as their prices fall.”
497. “Quien se conforme con ganancias seguras, difícilmente llegará a amasar grandes riquezas; quien lo fíe todo a grandes aventuras, frecuentemente quebrará y caerá en la pobreza: es bueno, por lo tanto, proteger las aventuras con los frutos de la certidumbre para que puedan soportar las pérdidas. Sir Francis Bacon”
498. “I don't see how you can say that the prices made in Wall Street are the right prices in any intelligent definition of what right prices would be.”
499. 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. (pg. 8)
500. “Security analysis does not assume that a past average will be repeated, but only that it supplies a rough index to what may be expected of the future. A trend, however, cannot be used as a rough index; it represents a definite prediction of either better or poorer results, and it must be either right or wrong.”
501. “the practitioner invests in common stocks the same number of dollars each month or each quarter. In this way he buys more shares when the market is low than when it is high, and he is likely to end up with a satisfactory overall price for all his holdings.”
502. “Speculation, I imagine, is a theme almost as popular as love; but in both cases most of the comments made are rather trite and not particularly helpful.”
503. “But make sure you remember this: The people who now claim that the next “sure thing” will be health care, or energy, or real estate, or gold, are no more likely to be right in the end than the hypesters of high tech turned out to be.”
504. “From this there has developed the general notion that the rate of return which the investor should aim for is more or less proportionate to the degree of risk he is ready to run. Our view is different. The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bring to bear on his task. The minimum return goes to our passive investor, who wants both safety and freedom from concern. The maximum return would be realized by the alert and enterprising investor who exercises maximum intelligence and skill.”
505. “something foolish, something creative and something generous.”
506. “para disfrutar de una probabilidad razonable de obtener unos resultados continuados mejores que la media, el inversor debe seguir unas políticas que sean (1) inherentemente sensatas, firmes y prometedoras, y (2) que no gocen de popularidad en el mercado de valores.”
507. “If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.”
508. “Without a saving faith in the future, no one would ever invest at all.” P 535”
509. “Capital expenditures are an essential tool for managers to make a good business grow bigger and better. But malleable accounting rules permit managers to inflate reported profits by transforming normal operating expenses into capital assets. As the Global Crossing case shows, the intelligent investor should be sure to understand what, and why, a company capitalizes.”
510. 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 minimise your odds of error. (pg. xiii)
511. “You have the luxury of being able to think for yourself.”
512. “El mercado es un péndulo que oscila constantemente entre un optimismo insostenible (que hace que las acciones sean demasiado caras) y un pesimismo injustificado (que hace que sean demasiado baratas). El inversor inteligente es un realista que vende a optimistas y compra a pesimistas. E”
513. “In market analysis there are no margins of safety; you are either right or wrong, and if you are wrong, you lose money.”
514. “Perhaps many of the security analysts are handicapped by a flaw in their basic approach to the problem of stock selection. They seek the industries with the best prospects of growth, and the companies in these industries with the best management and other advantages. The implication is that they will buy into such industries and such companies at any price, however high, and they will avoid less promising industries and companies no matter how low the price of their shares. This would be the only correct procedure if the earnings of the good companies were sure to grow at a rapid rate indefinitely in the future, for then in theory their value would be infinite. And if the less promising companies were headed for extinction, with no salvage, the analysts would be right to consider them unattractive at any price.”
515. “Here are some quick considerations for the intelligent investor: Is the “net pension benefit” more than 5% of the company’s net income? (If so, would you still be comfortable with the company’s other earnings if those pension gains went away in future years?) Is the assumed “long-term rate of return on plan assets” reasonable? (As of 2003, anything above 6.5% is implausible, while a rising rate is downright delusional.)”
516. “Our study of the various methods has led us to suggest a foreshortened and quite simple formula for the valuation of growth stocks, which is intended to produce figures fairly close to those resulting from the more refined mathematical calculations. Our formula is: Value = Current (Normal) Earnings × (8.5 plus twice the expected annual growth rate) The growth figure should be that expected over the next seven to ten years.”
517. “All my experience goes to show that most investment advisers take their opinions and measures of stock values from stock prices. In the stock market, value standards do not determine prices; prices determine value standards.”
518. “Hence, after this foreshortened discussion of the major considerations, we once again enunciate the same basic compromise policy for defensive investors—namely that at all times they have a significant part of their funds in bond-type holdings and a significant part also in equities.”
519. “Finally, most of the high returns on IPOs are captured by members of an”
520. “Buying a bond only for its yield is like getting married only for the sex. If the thing that attracted you in the first place dries up, you’ll find yourself asking, “What else is there?” When the answer is “Nothing,” spouses and bondholders alike end up with broken hearts.”
521. “Lucent’s stock, at $51.062 on June 30, 2000, finished 2002 at $1.26—a loss of nearly $190 billion in market value in two-and-a-half years.”
522. “The future, as I see it, is something to be protected against rather than to exploit.”
523. “The only thing you can be sure of is that there are times when large numbers of stocks are priced too high and other times when they're priced too low.”
524. “A common stock investor is one who regards his common stock holdings as a proprietary interest in various businesses, not as a series of quotations in a newspaper.”
525. “It is our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity—provided that the buyer is informed and experienced and that he practices adequate diversification. For, if the price is low enough to create a substantial margin of safety, the security thereby meets our criterion of investment”
526. “The essence of proper bond selection consists, ... in obtaining specific and convincing factors of safety in compensation for the surrender of participation in profits.”
527. “Such an investor may for example be a buyer of air-transport stocks because he believes their future is even more brilliant than the trend the market already reflects. For this class of investor the value of our book will lie more in its warnings against the pitfalls lurking in this favorite investment approach than in any positive technique that will help him along his path.”
528. “todas las malas ideas son buenas al principio”
529. “You must thoroughly analyze a company, and the soundness of its underlying businesses, before you buy its stock; And you must deliberately protect yourself against serious losses; you must aspire to “adequate,” not extraordinary, performance.”
530. “The wisdom god, Woden, went out to the king of the trolls, got him in an armlock, and demanded to know of him how order might triumph over chaos. “Give me your left eye,” said the troll, “and I’ll tell you.” Without hesitation, Woden gave up his left eye. “Now tell me.” The troll said, “The secret is, ‘Watch with both eyes!”
531. “we regard growth stocks as a whole as too uncertain and risky a vehicle for the defensive investor. Of course, wonders can be accomplished with the right individual selections, bought at the right levels, and later sold after a huge rise and before the probable decline.”
532. “The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price.”
533. 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 judgement on price versus value with the smallest possible sums. (pg. 120)
534. “Let us define the speculator as one who seeks to profit from market movements, without primary regard to intrinsic values; the "prudent stock investor" as one who (a) buys only at prices amply supported by underlying value, and (b) who determinedly reduces his stock holdings when the market enters the speculative phase of a sustained advance.”
535. “Blessed is he who expecteth nothing, for he shall not be disappointed.”
536. “Before you place your financial future in the hands of an adviser, it’s imperative that you find someone who not only makes you comfortable but whose honesty is beyond reproach.” Benjamin Graham
537. “An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
538. People who invest make money for themselves; people who speculate make money for their brokers. And that, in turn, is why Wall Street perennially downplays the durable virtues of investing and hypes the gaudy appeal of speculation. (pg. 36)
539. “Never mingle your speculative and investment operations in the same account nor in any part of your thinking.”
540. “But if a broker ever tries to sell you an individual mortgage bond or “CMO,” tell him you are late for an appointment with your proctologist.”
541. “just as in 1929 the companion theory for the “blue chips” was that no price was too high for them because their future possibilities were limitless.”
542. “The stock market resembles a huge laundry in which institutions take in large blocks of each other’s washing – without rhyme or reason.” Benjamin Graham
543. “The art of investment has one characteristic that is not generally appreciated. A creditable, if unspectacular, result can be achieved by the lay investor with a minimum of effort and capability; but to improve this easily attainable standard requires much application and more than a trace of wisdom. If you merely try to bring just a little extra knowledge and cleverness to bear upon your investment program, instead of realizing a little better than normal results, you may well find that you have done worse.”
544. “More important, buying IPOs is a bad idea because it flagrantly violates one of Graham’s most fundamental rules: No matter how many other people want to buy a stock, you should buy only if the stock is a cheap way to own a desirable business.”
545. The best values today are often found in the stocks that were once hot and have since gone cold. (pg. 371)
546. “As a rule of thumb, investors should spend the bulk of their time on the disclosures of the security under study, and they should spend significant time on the reports of competitors.”
547. “Be sure to compare the footnotes with those in the financial statements of at least one firm that’s a close competitor, to see how aggressive your company’s accountants are.”
548. “Everybody knows that most people who trade in the market lose money at it in the end. The people who persist in trying it are either (a) unintelligent, or (b) willing to lose money for the fun of the game, or (c) gifted with some uncommon and incommunicable talent. In any case they are not investors. p12”
549. “If all that can be promised is an average result, how can managers expect to be paid large fees for providing that average result?”
550. “So how many of the Forbes 400 fortunes from 1982 remained on the list 20 years later? Only 64 of the original members—a measly 16%—were still on the list in 2002. By keeping all their eggs in the one basket that had gotten them onto the list in the first place—once-booming industries like oil and gas, or computer hardware, or basic manufacturing—all the other original members fell away. When hard times hit, none of these people—despite all the huge advantages that great wealth can bring—were properly prepared. They could only stand by and wince at the sickening crunch as the constantly changing economy crushed their only basket and all their eggs.10”
551. “I feel grateful to the Milesian wench who, seeing the philosopher Thales continually spending his time in contemplation of the heavenly vault and always keeping his eyes raised upward, put something in his way to make him stumble, to warn him that it would be time to amuse his thoughts with things in the clouds when he had seen to those at his feet. Indeed she gave him or her good counsel, to look rather to himself than to the sky. —Michel de Montaigne”
552. “Everything changes, including companies, regulations and the economy, but people do not, and people are what drive the market.”
553. “A great company is not a great investment if you pay too much for the stock.”
554. “My experience teaches me that by far the largest losses have been sustained by investors through buying securities of inferior quality under favorable general conditions.”
555. “A hot stock, like a hot stove, should be handled with care.”
556. “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.”
557. “But note this important fact: The true investor scarcely ever is forced 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.* Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.”
558. “cash from financing activities” on the statement of cash flows in the annual report. They can make a sick company appear to be growing even if its underlying businesses are not generating enough cash—as Global Crossing and WorldCom showed not long ago.”
559. “In February 2000, hedge-fund manager James J. Cramer proclaimed that Internet-related companies “are the only ones worth owning right now.” These “winners of the new world,” as he called them, “are the only ones that are going higher consistently in good days and bad.”
560. Nothing important on Wall Street can be counted on to occur exactly in the same way as it happened before. (pg. 208)
561. “The intelligent investor realizes that stocks become more risky, not less, as their prices rise—and less risky, not more, as their prices fall. The intelligent investor dreads a bull market, since it makes stocks more costly to buy. And conversely (so long as you keep enough cash on hand to meet your spending needs), you should welcome a bear market, since it puts stocks back on sale. 8”
562. “It follows from this reasoning that the majority of security owners should elect the defensive classification. They do not have the time, or the determination, or the mental equipment to embark upon investing as a quasi-business. They should therefore be satisfied with the excellent return now obtainable from a defensive portfolio (and with even less), and they should stoutly resist the recurrent temptation to increase this return by deviating into other paths.”
563. “I deny emphatically that because the market has all the information it needs to establish a correct price the prices it actually registers are in fact correct.”
564. The secret of sound investment into three words: Margin of Safety. (pg. 512)
565. “To my mind, the so-called growth-stock investor -- or the average security analyst for that matter -- has no idea of how much to pay for a growth stock, how many stocks to buy to obtain the desired return, or how their prices will behave.”
566. “the really dreadful losses” always occur after “the buyer forgot to ask ‘How much?’” Most painfully of all, by losing their self-control just when they needed it the most, these people proved Graham’s assertion that “the investor’s chief problem—and even his worst enemy—is likely to be himself.”
567. An investor calculates what a stock is worth, based on the value of its businesses. (pg. 36)
568. “If you receive a 2% raise in a year when inflation runs at 4%, you will almost certainly feel better than you will if you take a 2% pay cut during a year when inflation is zero. Yet both changes in your salary leave you in a virtually identical position—2% worse off after inflation. So long as the nominal (or absolute) change is positive, we view it as a good thing—even if the real (or after-inflation) result is negative.”
569. “Such a procedure would divide the work between senior and junior analysts as follows: (1) The senior analyst would set up the formula to apply to all companies generally for determining past-performance value. (2) The junior analysts would work up such factors for the designated companies—pretty much in mechanical fashion. (3) The senior analyst would then determine to what extent a company’s performance—absolute or relative—is likely to differ from its past record, and what change should be made in the value to reflect such anticipated changes. It would be best if the senior analyst’s report showed both the original valuation and the modified one, with his reasons for the change. Is”
570. “The investor's chief problem - and even his worst enemy - is likely to be himself.”
571. “savings and time deposits, savings-and-loan-association accounts, life insurance, annuities, and real-estate mortgages or equity ownership.”
572. “There is a considerable tendency for common stock investors to do the greater part of their buying, both of "good" and "bad" securities, at high levels of the market. They are equally inclined to do the greater part of their selling at low levels of the market, a procedure which is not conducive to successful results.”
573. We define a bargain issue as one which, on the basis of facts established by analysis, appears to be worth considerably more that it is selling for. (pg. 166)
574. “Economist picture a thousand buyers and sellers congregating in the market place to match their keen wits and finally evolve the correct price for each commodity. In the securities market particularly, the word of the ticker is accepted as law, so that one often thinks of prices as determining values, instead of vice-versa.”
575. “Abnormally good or abnormally bad conditions do not last forever.”
576. “The Street, unfortunately, is fairly well inured to the bursting of bubbles.”
577. “... The soundness of the best investments must rest not upon legal rights or remedies but upon ample financial capacity of the enterprise.”
578. “The essence of investment management is the management of risks, not the management of returns.” Benjamin Graham
579. “The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances. He should always remember that market quotations are there for his convenience, either to be taken advantage of or to be ignored. He should never buy a stock because it has gone up or sell one because it has gone down. He would not be far wrong if this motto read more simply: “Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop.”
580. “element of concreteness here, let us suggest that to be “large” in present-day terms a company should have $50 million of assets or do $50 million of business.* Again to be “prominent” a company should rank among the first quarter or first third in size within its industry group.”
581. “They will fluctuate.”
582. “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.” Benjamin Graham
583. “An intelligent investor gets satisfaction from the thought that his operations are exactly opposite to those of the crowd.”
584. “personas que tienen unos ingresos fijos en términos monetarios sufrirán cuando el coste de la vida aumente,”
585. “Lucent, Not Transparent In mid-2000, Lucent Technologies Inc. was owned by more investors than any other U.S. stock. With a market capitalization of $192.9 billion, it was the 12th-most-valuable company in America. Was that giant valuation justified? Let’s look at some basics from Lucent’s financial report for the fiscal quarter ended June 30, 2000:1 FIGURE 17-1 Lucent Technologies Inc. All numbers in millions of dollars. * Other assets, which includes goodwill.
586. “Texaco's unusual situation can be summarized in one sentence, often repeated by Graham and Dodd disciple Warren Buffett: A great investment opportunity occurs when a marvelous business encounters a onetime huge, but solvable, problem.”
587. “The typical experience of the speculator is one of temporary profit and ultimate loss.”
588. “Blessed is he who expecteth nothing, for he shall not be disappointed.” Chesterton’s rejoinder? “Blessed is he who expecteth nothing, for he shall enjoy everything.”
589. “But this may be the place to remark that the very fact that the unit costs of electricity, gas, and telephone services have advanced so much less than the general price index puts these companies in a strong strategic position for the future.3 They are entitled by law to charge rates sufficient for an adequate return on their invested capital, and this will probably protect their shareholders in the future as it has in the inflations of the past.”
590. “No borrowing to buy or hold securities. No increase in the proportion of funds held in common stocks. A reduction in common-stock holdings where needed to bring it down to a maximum of 50 per cent of the total portfolio. The capital-gains tax must be paid with as good grace as possible, and the proceeds invested in first-quality bonds or held as a savings deposit.”
591. “The speculative public is incorrigible. In financial terms it cannot count beyond 3.”
592. “Let us define the speculator as one who seeks to profit from market movements, without primary regard to intrinsic value; the prudent stock investor as one who (a) buys only at prices amply supported by underlying value, and (b) who determinedly reduces his stock holdings when the market enters the speculative phase of a sustained advance.”
593. “You’d insist on your right to take control of your own emotional life, based on your experiences and your beliefs. But, when it comes to their financial lives, millions of people let Mr. Market tell them how to feel and what to do—despite the obvious fact that, from time to time, he can get nuttier than a fruitcake.”
594. “particularly as to whether they have a clear concept of the differences between investment and speculation and between market price and underlying value.”
595. “The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.” Benjamin Graham
596. “By refusing to pay too much for an investment, you minimize the chances that your wealth will ever disappear or suddenly be destroyed.”
597. “the investor’s chief problem—and even his worst enemy—is likely to be himself. (“The fault, dear investor, is not in our stars—and not in our stocks—but in ourselves….”)”
598. “intelligence has nothing to do with IQ or SAT scores. It simply means being patient, disciplined, and eager to learn;”
599. “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.” Benjamin Graham
600. “The real money in investment will have to be made- as most of it has been in the past- not out of buying and selling but of owning and holding securities, receiving interest and dividends and increases in value. pxvii”
601. “Putting up to a third of your stock money in mutual funds that hold foreign stocks (including those in emerging markets) helps insure against the risk that our own backyard may not always be the best place in the world to invest.”
602. “If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume. ”
603. “Many Internet IPOs rose 1,000% or more in 1999 and early 2000; most of them lost more than 95% in the subsequent three years. How could these early gains earned by a few investors justify the massive destruction of wealth suffered by the millions who came later? Many IPOs were, in fact, deliberately underpriced to “manufacture” immediate gains that would attract more attention for the next offering.”
604. “The true measure of common stock values, of course, is not found by reference to price movements alone, but by price in relation to earnings, dividends, future prospects and, to a small extent, asset values.”
605. “A strong-minded approach to investment, firmly based on the margin-of-safety principle, can yield handsome rewards. But a decision to try for these emoluments rather than for the assured fruits of defensive investment should not be made without much self-examination.”
606. It’s nonsensical to derive a price/earnings ratio by dividing the known current price by unknown future earnings. (pg. 374)
607. “it’s worth repeating that for most investors, selecting individual stocks is unnecessary—if not inadvisable. The fact that most professionals do a poor job of stock picking does not mean that most amateurs can do better. The vast majority of people who try to pick stocks learn that they are not as good at it as they thought; the luckiest ones discover this early on, while the less fortunate take years to learn it. A small percentage of investors can excel at picking their own stocks. Everyone else would be better off getting help, ideally through an index fund.”
608. “arte de la inversión de éxito radica en primer lugar en la elección de los sectores que tienen más probabilidades de crecer en el futuro, y en la identificación de las empresas más prometedoras dentro de esos sectores.”
609. 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. (pg. 180)
610. “If “nonrecurring” charges keep recurring, “extraordinary” items crop up so often that they seem ordinary, acronyms like EBITDA take priority over net income, or “pro forma” earnings are used to cloak actual losses, you may be looking at a firm that has not yet learned how to put its shareholders’ long-term interests first.9”
611. “Be fearful when others are greedy and greedy when others are fearful.” Benjamin Graham
612. “Experience teaches that the time to buy stocks is when their price is unduly depressed by temporary adversity. In other words, they should be bought on a bargain basis or not at all.”
613. “The happiness of those who want to be popular depends on others; the happiness of those who seek pleasure fluctuates with moods outside their control; but the happiness of the wise grows out of their own free acts.”
614. “It may be that professionally managed funds are too large a part of the total picture to be able to outperform the market as a whole; it may also be true, as I suspect, that certain weaknesses in their basic principles of stock selection tend to offset the superior training, intelligence, and effort that they bring to this task.”
615. “The intelligent investor will remember the wise words of financial analyst Mark Schweber: “The one question never to ask a bureaucrat is ‘Why?”
616. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” —Warren Buffett
617. “Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.” Benjamin Graham
618. “I am an exponent of the philosophy that the main objective of common stock investment should be pricing, not timing; and by pricing I mean the endeavor to buy securities at prices which are attractive, letting timing take care of itself.”
619. “follow the behavioral and business”
620. “exclusive private club—the big investment banks and fund houses that get shares at the initial (or “underwriting”) price, before the stock begins public trading. The biggest “run-ups” often occur in stocks so small that even many big investors can’t get any shares; there just aren’t enough to go around.”
621. “In other words, the market is not a weighing machine, on which the value of each issue is recorded by an exact and impersonal mechanism, in accordance with its specific qualities. 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.”
622. “Evidently it is not only the tyro who needs to be warned that while enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.”
623. “Obvious prospects for physical growth in a business do not translate into obvious profits for investors.”
624. “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 naïveté. Businessmen seek professional advice on various elements of their business, but they do not expect to be told how to make a profit. That is their own bailiwick. When they, or nonbusiness people, rely on others to make investment profits for them, they are expecting a kind of result for which there is no true counterpart in ordinary business affairs.”
625. “A criterion based on adjectives is always ambiguous.”
626. “It casts some little doubt in my mind as to the complete dependability of the popular belief among analysts that prominent and promising companies will now always sell at high price-earnings ratios—that this is a fundamental fact of life for investors and they may as well accept and like it. I have no desire at all to be dogmatic on this point. All I can say is that it is not settled in my mind, and each of you must seek to settle it for yourself.”
627. “Defensive investors, as we have defined them, will not ordinarily be equipped to pass independent judgment on the security recommendations made by their advisers. But they can be explicit—and even repetitiously so—in stating the kind of securities they want to buy. If they follow our prescription they will confine themselves to high-grade bonds and the common stocks of leading corporations, preferably those that can be purchased at individual price levels that are not high in the light of experience and analysis.”
628. “Although Ball ended up priced far more cheaply than Stryker, the lesson here is not that Ball was a steal and Stryker was a wild pitch. Instead, the intelligent investor should recognize that market panics can create great prices for good companies (like Ball) and good prices for great companies (like Stryker). Ball finished 2002 at $51.19 a share, up 53% from its July low; Stryker ended the year at $67.12, up 47%. Every once in a while, value and growth stocks alike go on sale. Which choice you prefer depends largely on your own personality, but bargains can be had on either side of the plate.”
629. “High multipliers have been maintained in the stock market only if the company has maintained better than average profitability.”
630. “Companies should buy back their shares when they are cheap—not when they are at or near record highs. Unfortunately, it recently has become all too common for companies to repurchase their stock when it is overpriced. There is no more cynical waste of a company’s cash—since the real purpose of that maneuver is to enable top executives to reap multimillion-dollar paydays by selling their own stock options in the name of “enhancing shareholder value.” A substantial amount of anecdotal evidence, in fact, suggests that managers who talk about “enhancing shareholder value” seldom do. In investing, as with life in general, ultimate victory usually goes to the doers, not to the talkers.”
631. “Price statistics show clearly that instability in raw-material prices is a prime cause of instability of other prices.”
632. We have not known a single person who has consistently or lastingly make money by thus “following the market”. We do not hesitate to declare this approach is as fallacious as it is popular. (pg. 3)
633. “In our view there is no superior advantage in any fixed pattern of diversification. It is not essential to spread the risk around, in pre-established proportions, so that each of the major categories of American enterprise is included. What is essential is that a reasonable diversity of industries be achieved, so that the investor can feel he has his stake in a fairly good cross section of the economy. p143”
634. “Investing is most intelligent when it is most businesslike.”
635. “REITs do a decent job of combating inflation. The best choice is Vanguard REIT Index Fund; other relatively low-cost choices include Cohen & Steers Realty Shares, Columbia Real Estate Equity Fund, and Fidelity Real Estate Investment Fund.”
636. “To supply an element of concreteness here, let us suggest that to be “large” in present-day terms a company should have $50 million of assets or do $50 million of business.* Again to be “prominent” a company should rank among the first quarter or first third in size within its industry group.”
637. “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.”
638. “In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.” Benjamin Graham
639. “Successful investing professionals are disciplined and consistent and they think a great deal about what they do and how they do it.”
640. “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.”
641. “That’s why inflation is so easy to overlook—and why it’s so important to measure your investing success not just by what you make, but by how much you keep after inflation.”
642. “knows the price of everything, and the value of nothing.”
643. “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.”
644. “Through chances various, through all vicissitudes, we make our way…. Aeneid”
645. “So when should you sell? Here a few definite red flags: a sharp and unexpected change in strategy, such as a “value” fund loading up on technology stocks in 1999 or a “growth” fund buying tons of insurance stocks in 2002; an increase in expenses, suggesting that the managers are lining their own pockets; large and frequent tax bills generated by excessive trading; suddenly erratic returns, as when a formerly conservative fund generates a big loss (or even produces a giant gain).”
646. “Those who do not remember the past are condemned to repeat it.”
647. “Among the things that should make your antennae twitch are technical terms like “capitalized,” “deferred,” and “restructuring”—and plain-English words signaling that the company has altered its accounting practices, like “began,” “change,” and”
648. “The intelligent investor should recognize that market panics can create great prices for good companies and good prices for great companies.”
649. “Never buy a stock because it has gone up or sell one because it has gone down.”
650. “A cynic once told G. K. Chesterton, the British novelist and essayist, “Blessed is he who expecteth nothing, for he shall not be disappointed.” Chesterton’s rejoinder? “Blessed is he who expecteth nothing, for he shall enjoy everything.”
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