Benjamin Graham

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Benjamin Graham (May 9, 1894September 21, 1976) was an influential economist and professional investor. Graham is considered the first proponent of Value Investing. Well known disciples (students and teaching assistants) of Graham include Warren Buffett, William J. Ruane, Irving Kahn, Walter J. Schloss, and Charles Brandes. Buffett, who credits Graham as grounding him with a sound intellectual investment framework, described him as the second most influential person in his life after his own father. In fact, Graham had such an overwhelming influence on his students that two of them, Buffett and Kahn, named their sons, Howard Graham Buffett and Thomas Graham Kahn, after him.


  • You are neither right nor wrong because people agree with you.
    • As quoted by Warren Buffett, in an interview in Forbes magazine (1 November 1974)

Storage and Stability (1937)[edit]

  • The idea of storage as a solution of economic problems at least has the support of common sense.It is diametrically opposed to the topsy-turvy Alice-in-Wonderland reasoning that has marked so much of our depression thinking and policy.
    • Preface, p. vii
  • Instead of passing blithely over into that Promised Land, flowing almost literally with milk and honey, it may be our destiny to wander a full 40 years or more in the wilderness of doubt and divided sentiments.
    • Part I, Chapter I, The Changing Role of Surplus Stocks, p. 4
  • Even the most conservative must realize that the recent transformation of surplus from an individual to a national disaster implies a scathing indictment of our capitalist system as it has now developed.
    • Part I, Chapter I, The Changing Role of Surplus Stocks, p. 17
  • Whether we like it or not, government intervention in the face of surplus is here to stay.
    • Part I, Chapter II, Government and Surplus Stocks, p. 26
The State can always afford to finance what its citizens can soundly produce.
  • It is a fact worth pondering that four centuries ago the evil of "an abundance or surplus" arose from its being kept off the market, while today the evil of surplus lies in its being thrown upon the market.
    • Part I, Chapter II, Government and Surplus Stocks, p. 28
  • The State can always afford to finance what its citizens can soundly produce.
    • Part I, Chapter III, The Problem of Conserving Surplus, p. 43 (italics as per text)
  • The Reservoir system will function not only as an equalizer of business conditions, but also as a national store to meet further emergencies, such as war and drought, and-most important of all-as the concrete means of developing a steadily higher living standard for all.
    • Part II, Chapter IV, A Plan For Conserving Surplus, p. 50
  • Why should the cotton growers suffer if there is shortage of wheat?
    • Part II, Chapter V, Reservoir System and Commodities, p. 72
  • Price statistics show clearly that instability in raw-material prices is a prime cause of instability of other prices.
    • Part II, Chapter VI, The Question of Price Stability, p. 85
  • The existence of such a war chest might go far to strengthen our prestige and frighten off any would be assailant.
    • Part II, Chapter VIII, Ultimate Uses of the Stored Units, p. 97
  • Both a priori reasoning and experience teach us that as as these funds grow larger the geometrical rate of growth by compound interest ultimately defeats itself.
    • Part II, Chapter VIII,Ultimate Uses of the Stored Units, p. 103
  • The money cost of the reservoir plan literally fades into insignificance when it is compared with the financial burden which the great depression imposed on the nation.
    • Part II, Chapter IX, The Cost of the Reservoir Plan, p. 114
  • The utility, or intrinsic value of gold as a commodity is now considerably less than in the past; its monetary status has become extraordinarily ambiguous; and its future is highly uncertain.
    • Part III, Chapter X, The Status of Gold and Silver, p. 127
  • THERE is widespread agreement among economists that abuse of credit constitutes one of the chief unwholesome elements in business booms and is mainly responsible for the ensuing crash and depression.
    • Part III, Chapter XIII, The Reservoir Plan and Credit Control, p. 153
  • The volume of credit depends upon three factors: the desire to borrow, the ability to lend and the desire to lend.
    • Part III, Chapter XIII, The Reservoir Plan and Credit Control, p. 154
  • There is something paradoxical in the fact that by establishing an export market we subject our entire domestic production to the vagaries of that market.
    • Part IV, Chapter XIV, Farm Problems and Remedies, p. 172
  • It must be fundamentally wrong to reduce production of food and fiber while one-third of our population is still ill fed and ill clothed.
    • Part IV, Chapter XVI, Reservoir Plan Versus Crop Control, p. 195
  • The Reservoir plan is an engineering mechanism applied to the field of economics, and in its essence it has nothing to do with democracy or any other political philosophy.
    • Part V, Chapter XIX, The Reservoir Plan and Tradition, p. 232
  • The people of the United States will not tolerate another deep depression that arises not from any lack of natural resources, productive capacity or man and brain power, but solely from imperfections in the functioning of the system of finance capitalism.
    • Part V, Chapter XIX, The Reservoir Plan and Tradition, p. 234 (See also; Karl Marx, Capital)

World Commodities and World Currencies (1944)[edit]

  • The world has not learned the technique of balanced expansion without the resultant commercial and financial congestion.
    • Chapter I, The Problem of Raw Materials, p. 5
  • Cartels have spread and will spread as long as the world lacks an effective mechanism by which balanced expansion may be achieved without a resulting disruption of prices.
    • Chapter II, The Issue of Cartels, p. 21
  • The modern world is not geared properly to the storage of goods.
    • Chapter III, The Paradox of the Stockpile, p. 23
  • The story of Joseph in Egypt and of the seven fat and the seven lean years has passed into the homely wisdom of the ages; but our economic thinking seems to have lost contact with so simple and basic approach to prudent management of a nations welfare.
    • Chapter V, Stabilization of Raw Materials, p. 56
  • Many progressive economists insist that gold is now in essentially the same position as silver and that the arguments the simon-pure gold advocates use against the white metal can be directed with equal effect against their own fetish.
    • Chapter IX, Commodities, Gold, Credit as Money, p. 100 (See also Karl Marx, Capital Volume I, p. 89)
  • It is a misfortune of the times that all of us must needs be amateur economists-including, and perhaps especially, the professionals.
    • Chapter X, Commodity Unit Stabilization, p. 109
  • We have introduced the monetary factor not by necessity but by choice. Its advantages are obvious. Self-financed commodity units are not only interest free, but free also from dependence upon credit conditions. They are a step-desirable, it seems to us-in the direction of a goods economy as distinct from a money economy; but this step is taken without violence by merely identifying basic goods with money. It guarantees unfailing purchasing power where it is most needed-among the countless producers of raw commodities.
    • Chapter X, Commodity Unit Stabilization, p. 114

The Intelligent Investor: The Classic Text on Value Investing (1949)[edit]

  • 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.
    • Introduction, p. xxiv
  • Successful investment may become substantially a matter of techniques and criteria that are learnable, rather than the product of unique and incommunicable mental powers.
    • Introduction, p. xxv
  • In nine companies out of ten the factor of fluctuation has been a more dominant and important consideration in the matter of investment than has the factor of long-term growth or decline
    • Introduction, p. xxvi
  • The history of the past fifty years, and longer, indicates that a diversified holding of representative common stocks will prove more profitable over a stretch of years than a bond portfolio, with one important provisio—that the shares must be purchased at reasonable market levels, that is, levels that are reasonable in the light of fairly well-defined standards derived from past experience.

Core principles[edit]

    a. A stock represents an ownership interest in an actual business with an underlying value that does not depend on its share price.
    b. The market is a pendulum that swings between optimism (making stock too expensive) and pessimism (too cheap).
    c. The future value of every investment is a function of its present price. The higher the price you pay, the lower your return.
    d. No matter how careful you are, you need a margin of safety--never overpaying after considering all risks.
    e. The secret of financial success is inside yourself. In the end, how your investments behave is much less important than how you behave.
        1. Be a critical thinker
        2. Invest with patient confidence

  • Chapter I, Investment Versus Speculation: Results to be Expected by the Intelligent Investor

  1. An investment operation is one which, upon thorough analysis, promises safety of principal and adequate return. Operations not meeting these requirements are speculative.
      a. Thoroughly analyze a company and the underlying business
      b. Deliberately protect yourself against serious losses
      c. Aspire to "adequate" and not extraordinary, performance
  2. Everyone who buys the so-called "hot" common stock issues is either speculating or gambling.
    a. An investor calculates what a stock is worth based on the value of the underlying business.
    b. A speculator gambles that a stock will go up in price because somebody else will pay even more for it.
  3. Bonds should never be less than 25% of the portfolio nor more than 75% of it.
  4. Simplest solution for the Defensive Investor is 50-50 common stocks and bonds.
  5. Adjust your portfolio
    a. whenever asset allocation shifts by 5% or more OR
    b. at regular intervals (i.e. 6 months)
  6. Alternative approach is to reduce common stock percentage to 25% when common stocks seem very speculatively high, or to increase stock percentage to 75% when common stocks seem very low.
  7. The future of security prices is never predictable.
  8. The Defensive Investor must confine himself to the shares of important companies with a long record of profitable operations and in strong financial condition.
  9. If you look at a large quantity of data long enough, a huge number of patterns will emerge, if only by chance.
  10. Stocks do well or poorly in the future because the businesses behind them do well or poorly - nothing more and nothing less.
  11. For most of us, 10% of our overall wealth is the maximum permissible amount to put at speculative risk.

  • Chapter II, The Investor and Inflation

  1. Will stocks definitely do better than bonds? No. They may do better than bonds but are far from certain to do so.
  2. There is no close time connection between inflationary or deflationary conditions and the movement of stock earnings and prices.
  3. There is no sign that inflation has had an effect on per share earnings.
  4. The figures say that the large gain in earnings in the past 20 yrs was due to a proportionally large growth of invested capital coming from reinvested profits.
  5. It is guaranteed that the earnings and average annual market value will not grow at a uniform rate. In the words of JP Morgan "they will fluctuate".
  6. If the investor concentrates his portfolio in stocks, he is very likely to be led astray by exhilarating advances or distressing declines.
  7. In the past 35 yrs (ending 1972) gold has risen by 35%, with no annual income the investor would have done better with his money in a savings bank.
  8. Valuables such as diamonds, paintings, rare books and stamps have had striking advances in values. But in most cases there seems to be an artificial even unreal element to quoted prices.
  9. Real estate values are also subject to wide fluctuations and serious errors can be made in location, price paid etc. Diversification is not practical for an investor of modest means. This too is not our field, be sure it's yours before you go into it.
  10. Due to uncertainties of the future the investor cannot afford to keep all his funds in one basket.

  • Chapter III, A Century of Stock Market History

  1. The period found the public with no enthusiasm for common stocks; by the rules of opposites, the time was right for the greatest bull market in our history.
  2. The 14% and better returns documented created an illogical and dangerous conviction that equally marvellous results could be expected from the future
  3. Few people seem to be bothered by the thought that the very extent of rise of the market might indicate that it had been overdone
  4. We cannot imagine a market of the future where there will never be serious losses and every tyro will be guaranteed a large profit
  5. The investor must base his policy on the existence of major uncertainties
  6. Investing policy under 1964 conditions
    a. No borrowing to buy or hold securities
    b. No increase in proportion of funds in common stocks
    c. A reduction of stock holding where needed to a max of 50% of portfolio. Pay capital gains gracefully and invest proceeds in high quality bonds or savings deposits

  • Chapter IV, General Portfolio Policy: The Defensive Investor

  1. Two ways to be an intelligent investor –
    a. An “active” or “enterprising” investor continuously researches, selects and monitors a dynamic mix of stocks, bonds, or mutual funds which takes up a lot of time and energy
    b. “Passive” or “defensive” investor is one who cannot afford to take risks, wants both safety & freedom from concern and is content with a relatively low return on their invested funds. They create a permanent portfolio that runs on autopilot & requires no further effort
  2. Fundamental guiding rule – Investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequent inverse range between 75% and 25% in bonds. There is an implication here that the standard division should be an equal one or 50-50 between the two major investment mediums.
  3. Once you set your proportions, change them only as your circumstances change.
  4. Re-balance every 6 months no more and no less on easy to remember dates. Re-balancing forces you to base your investing decisions on a simple, objective standard – Do I now own more of this asset than my plan calls for?
  5. Bond funds bring easy diversification.

  • Chapter V, Defensive Investor and Common Stocks

  1. The argument for common stocks - they offer
    a. A considerable degree of protection against inflation (bonds, at least before TIPS, offer none)
    b. Higher average return to investors over the years (combination of dividend yield and appreciation in value)
  2. These two benefits of common stock investments are lost if too high a price is paid.
  3. Rules for common stock investment:
    a. There should be adequate but not excessive diversification. (minimum of 10, maximum of 30 different issues)
    b. Each company should be large, prominent and conservatively financed
    c. Each company should have a long record of continuous dividend payments
    d. Investor should limit the price paid to not more than 25 times average earnings for the past 7 years and not more than 20 times the last 12 month period
  4. Graham says that "we regard growth stocks as a whole as too uncertain and risky a vehicle for the defensive investor. In contrast we think that the group of large companies that are relatively unpopular and therefore obtainable at reasonable earnings multipliers, offers a second if unspectacular area of choice by the general public."
  5. Note on the Category of "Large, Prominent and Conservatively Financed Corporations"
    a. Finances are not conservative unless book value is at least half of the total capitalization, including bank debt
    b. Large and prominent relate to size and leading position
  6. Decision about investing in common stocks has nothing to do with how much you might have lost in the past. When stocks are priced reasonably enough to give you future growth, then you should own them, regardless of the losses that you have had before.

  • Chapter VI: Portfolio policy for the Enterprising Investor: Negative approach (i.e. the don’ts)

  A. The aggressive investor starts from the same base as the defensive investor
    1. Division of funds between high grade bonds and common stocks bought at reasonable prices
  B. Junk bonds
   1. Graham gave them a big thumbs down
    2. Today however there funds that offer diversification that concerned Graham, and have much lower cost
    However most junk bond funds have higher costs and do not do a good job of preserving principal
  C. The more you trade, the less you keep

  • Chapter VII, Portfolio policy for the Enterprising Investor: The Positive side (i.e. the do's)

  A. The Enterprising Investor does all the work he does to obtain a slightly better investment result
    1. Many would think that you just buy when the market is down and sell when it is up. But thorough analysis shows that attempts to do this just don't work
    2. The best way for dealing with ups and downs in the market is through allocation of stock and bond investment proportions. The general allocation suggested for defensive investor applies here
      a) 50-50 is best for most
      b) Wide leeway to go 75/25 or 25/75
      c) Re-balance
  B. Growth Stock approach
    1. Every investor would like to select the stocks of companies that will do better than the average over a period of years
    2. A growth stock may be defined as one that has done this in the past and is expected to do so in the future
    3. It is just a statistical chore to identify companies that have outperformed the averages in the past
    4. There are 2 problems with just picking some of these stocks that have outperformed in the past
      a) Stocks with good records and apparently good prospects in the future sell at correspondingly high prices - so you could be right about the good future prospects but might not do well with the investment because you overpaid
      b) Judgment about future performance may prove wrong. Rapid growth cannot continue forever and at some point it will flatten out

    • Chapter I, What the Intelligent Investor Can Accomplish, p. 7
  • Stocks can be dynamite.
    • Chapter I, What the Intelligent Investor Can Accomplish, p. 8
  • The genuine investor in common stocks does not need a great equipment of brain and knowledge, but he does need some unusual qualities of character
    • Chapter I, What the Intelligent Investor Can Accomplish, p. 8
  • 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.
    • Chapter I, What the Intelligent Investor Can Accomplish, p. 11
  • The chief obstacle to success lies in the stubborn fact that if the favorable prospects of a concern are clearly apparent they are almost always reflected already in the current price of the stock. Buying such an issue is like betting on a topheavy favorite in a horse race. The chances may be on your side, but the real odds are against you.
    • Chapter I, What the Intelligent Investor Can Accomplish, p. 14
  • you may take it as an axiom that you cannot profit in Wall Street by continuously doing the obvious or the popular thing
    • Chapter I, What the Intelligent Investor Can Accomplish, p. 14
  • All 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 out of owning and holding securities, receiving interests and dividends therein, and benefiting from their long-term increases in value. Hence stockholder's major energies and wisdom as investors should be directed toward assuring themselves of the best operating results from their corporations. This in turn means assuring themselves of fully honest and competent managements.
    • Chapter I, What the Intelligent Investor Can Accomplish, p. 17
  • Nothing in finance is more fatuous and harmful, in our opinion, than the firmly established attitude of common stock investors regarding questions of corporate management. That attitude is summed up in the phrase: "If you don't like the management, sell your stock." [...] The public owners seem to have abdicated all claim to control over the paid superintendents of their property
    • Chapter I, What the Intelligent Investor Can Accomplish, p. 18
  • Intelligent investment is more a matter of mental approach than it is of technique. A sound mental approach toward stock fluctuations is the touchstone of all successful investment under present-day conditions.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 21
  • The investor is neither smart not richer when he buys in an advancing market and the market continues to rise. That is true even when he cashes in a goodly profit, unless either (a) he is definitely through with buying stocks—an unlikely story—or (b) he is determined to reinvest only at considerably lower levels. In a continuous program no market profit is fully realized until the later reinvestment has actually taken place, and the true measure of the trading profit is the difference between the previous selling level and the new buying level.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 24
  • In most cases the favorable price performance will be accompanied by a well-defined improvement in the average earnings, in the dividend, and in the balance-sheet position. Thus in the long run the market test and the ordinary business test of a successful equity commitment tend to be largely identical.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 25
  • A price decline is of no real importance to the bona fide investor unless it is either very substantial—say, more than a third from cost—or unless it reflects a known deterioration of consequence in the company's position. In a well-defined bear market many sound common stocks sell temporarily at extraordinary low prices. It is possible that the investor may then have a paper loss of fully 50 per cent on some of his holdings, without any convincing indication that the underlying values have been permanently affected.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 25
  • Why could the typical investor expect any better success in trying to buy at low levels and sell at high levels than in trying to forecast what the market is going to do? Because if he does the former he acts only after the market has moved down into buying levels or up into selling levels. His role is not that of a prophet but of a businessman seizing clearly evident investment opportunities. He is not trying to be smarter than his fellow investors but simply trying to be less irrational than the mass of speculators who insist on buying after the market advances and selling after it goes down. If the market persists in behaving foolishly, all he seems to need is ordinary common sense in order to exploit its foolishness.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 31
  • The investor has a right to expect good results to flow from a consistent and courageous application of the principle of buying after the market has declined substantially and selling after it has had a spectacular rise. But he cannot expect to reduce this principle to a simple and foolproof formula, with profits guaranteed and no anxious periods.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 33
  • The reader can test his own psychology by asking himself whether he would consider, in retrospect, the selling at 156 in 1925 and buying back at 109 in 1931 was a satisfactory operation. Some may think that an intelligent investor should have been able to sell out much closer to the high of 381 and to buy back nearer the low of 41. If that is your own view you are probably a speculator at heart and will have trouble keeping to true investment precepts while the market rushes up and down.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 34
  • It is worth pointing out that assuredly not more than one person out of a hundred who stayed in the market after after 1925 emerged from it with a net profit and that the speculative losses taken were appalling.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 34
  • The investor cannot enter the arena of the stock market with any real hope of success unless he is armed with mental weapons that distinguish him in kind—not in a fancied superior degree—from the trading public. One possible weapon is indifference to market fluctuations; such an investor buys carefully when he has money to place and then let's prices take care of themselves. But, if the investor intends to buy and sell recurrently, his weapons must be a frame of mind and a principle of action which are basically different from those of the trader and speculator. He must deal in values, not in price movements. He must be relatively immune to optimism or pessimism and impervious to business or stock-market forecasts. In a word, he must be psychologically prepared to be a true investor and not a speculator masquerading as an investor. If he can meet this test, he will be a member not of the public al large but of a specialized and self-disciplined group.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 34
  • Whenever the investor sold out in an upswing as soon as the top level of the previous well-recognized bull market was reached, he had a chance in the next bear market to buy back at one third (or better) below his selling price.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 35
  • The graph does show one tremendous rise and collapse which stands out starkly from all the other fluctuations. This is commonly called the "new era" stock market of 1927-33. The striking feature of this phenomenon was that the new era existed solely in the minds of market speculators. The whole episode, in retrospect, now seems to have been one of those rare manifestations of mass financial madness which we used to study in our history books under the titles of "the South Sea Bubble", "the Mississippi Bubble" and so on.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 36
  • Past experience appears to have particular validity and value in dealing with the stock market. The good old rules all seem to be good still. It is conceivable, of course, that the continuity of the market may end someday—perhaps tomorrow—and past experience may really prove an handicap in meeting the new conditions, as it appeared to be a handicap for a great many months in 1927-29. But is it not the part of intelligence to run the small risk of being wrong by sticking to the old principles, rather than to run the big risk of being wrong by breaking away from past experience?
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 36
  • Individual security bargains may be located by the process of security analysis practically at any time. They can be bought with good overall results at all periods except when the general market itself is clearly in a selling range for investors. They show up to best advantage during the years in which the market remains in a relatively narrow and neutral area.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 37
  • The purchase of a bargain issue presupposes that the market's current appraisal is wrong, or at least that the buyer's idea of value is more likely to be right than the market's. In this process the investor sets his judgement against that of the market. To some this may seem arrogant or foolhardy.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 38
  • In the case of the typical undervalued issue, the previous market action has not been encouraging; the issue is unpopular with stock traders and technical experts and is relatively unknown or neglected. There is no reason at all to expect that it's price will advance promptly after the investor decides to buy it. In fact, one May wonder why, if the market undervalues the issue at the time he purchases, it should not continue indefinitely to do so and perhaps even increase the measure of undervaluation. There is no theoretical reason why these unpalatable results could not occur. The comfort and encouragement to the intelligent investor are to be found in practical experience. In the long run, securities tend to reach and sell at a price level not disproportionate to their indicated value. This statement is indefinite as to time; in some cases the day of vindication has actually been deferred for many years. But the investor should base his policy on average experience rather than on exceptions. Our own records indicate that the interval required for a substantial undervaluation to correct itself averages approximately 1½ to 2½ years.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 38
  • If General Motors is worth $60 a share to an investor it must be because the full common-stock ownership of this gigantic enterprise as a whole is worth 43 million (shares) times $60, or no less than $2,600 million.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 39
  • What, then did the individual holder of 10 or 100 or 1,000 shares of Great Atlantic & Pacific really own in March, 1938? Did he own a small fraction of the entire enterprise, just as the Hartford family owned a large fraction? Or did he own primarily a stock certificate entitling him only to receive dividends when and if declared and to receive the quoted market price when he sold out? Another way to put this vital question is as follows: Did the investor who bought A. & P. stock at 80 really lose money when it's price dropped to 36? Was he definitely poorer than before? The correct answer to this question is the key to the broader problem of the investor's relationship to the price fluctuation of his common stocks. As we see it, the investor-stockholder occupies a middle or compromise position between true ownership of a business and mere ownership of a stock certificate. He undoubtedly lacks some important powers of control which inhere in individual or partnership-group possession of the enterprise. But in this respect he is in a position no different from that of a minority holder of shares in a private business, when such holder is not part of the controlling group. But he also has what is in truth a tremendous advantage over such a minority holder, in that he can sell his own shares any time he wants to at their market price.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 40
  • The true investor scarcely ever has to sell his shares, and at all other times he is free di 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 judgement.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 40
  • The investor has the benefit of the stock market's daily and changing appraisal of his holdings, for whatever that appraisal may be worth, and, second, that the investor is able to increase or decrease his investment at the market's daily figure—if he chooses. Thus the existence of a quoted market gives the investor certain options which he does not have if his security is unquoted. But it does not impose the current quotation on an investor who prefers to take his idea of value from some other source.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 41
  • Imagine that in some private business you own a small share which 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. If you are a prudent investor or a sensible businessman will you let Mr. Market's daily communication determine your view as the value of your $1,000 interest in the enterprise? Only in case you agree with him, or in case you want to trade with him. You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low. But the rest of the time you will be wiser to form your owing ideas of the value of your holdings, based on full reports from the company about its operations and financial position.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 42
  • 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. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 42
  • The investor's primary interest lies in acquiring and holding suitable securities at suitable prices.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 43
  • The investor 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".
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 43
  • Good managements produce a good average market price, and bad managements produce bad market prices.
    • Chapter II, The Investor and Stock-Market Fluctuations, p. 44
  • If we assume that there are normal or standard income results to be obtained from investing money in securities, then the role of the adviser can be more readily established. He will use his superior training and experience to protect his clients against mistakes and to make sure that they obtain the results to which their money is entitled.
    • Chapter III, The Investor and His Advisers, p. 45
  • Certain common-sense consideration relate to the criterion of normal or standard results mentioned above. Our basic thesis is this: If the investor is to rely chiefly on the advice of others in handling his funds, then either (a) he must limit himself and his advisers strictly to standard, conservative, and even un imaginative forms of investment or (b) he must have an unusually intimate and favorable knowledge of the person who is going to direct his funds into other channels; for only to the extent that the investor himself grows in knowledge and competence and therefore becomes qualified to pass independent judgement on the recommendations of others can he be receptive to less conventional suggestions from his advisers.
    • Chapter III, The Investor and His Advisers, p. 46
  • Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do. The demand being there, it must be supplied.
    • Chapter III, The Investor and His Advisers, p. 48
  • The value of the security analyst to the investor depends largely on the investor's own attitude. If the investor asks the analyst the right questions, he is likely to get the right—or at least valuable— answers.
    • Chapter III, The Investor and His Advisers, p. 51
  • Good management are rarely overcompensated to an extent that makes any significant difference with respect to the stockholder's position. Poor management are always overcompensated, because they are worth less than nothing to the owners.
    • Chapter XIV, Stockholders and Managements, p. 209

The Intelligent Investor (1973) (Fourth Revised Edition)[edit]

  • Unusually rapid growth cannot keep up forever; when a company has already registered a brilliant expansion, its very increase in size makes a repetition of its achievement more difficult.
    • Chapter 7, Portfolio Policy: The Positive Side, p. 75
Investment is most intelligent when it is most businesslike.
  • Wall Street has a few prudent principles; the trouble is that they are always forgotten when they are most needed.
    • Chapter 16, Convertible Issues and Warrants, p. 225
  • 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.
    • Chapter 20, "Margin of Safety": The Central Concept, p. 280
  • Investment is most intelligent when it is most businesslike.
    • Chapter 20, "Margin of Safety": The Central Concept, p. 286
  • Do not let anyone else run your business,
    • Chapter 20, "Margin of Safety": The Central Concept, p. 286
  • To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.
    • Chapter 20, "Margin of Safety": The Central Concept, p. 287

Quotes about Graham[edit]

  • A story that was passed down from Ben Graham illustrates the lemminglike behavior of the crowd: "Let me tell you the story of the oil prospector who met St. Peter at the Pearly Gates. When told his occupation, St. Peter said, “Oh, I’m really sorry. You seem to meet all the tests to get into heaven. But we’ve got a terrible problem. See that pen over there? That’s where we keep the oil prospectors waiting to get into heaven. And it’s filled—we haven’t got room for even one more.” The oil prospector thought for a minute and said, “Would you mind if I just said four words to those folks?” “I can’t see any harm in that,” said St. Pete. So the old-timer cupped his hands and yelled out, “Oil discovered in hell!” Immediately, the oil prospectors wrenched the lock off the door of the pen and out they flew, flapping their wings as hard as they could for the lower regions. “You know, that’s a pretty good trick,” St. Pete said. “Move in. The place is yours. You’ve got plenty of room.” The old fellow scratched his head and said, “No. If you don’t mind, I think I’ll go along with the rest of ’em. There may be some truth to that rumor after all."

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