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The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is cause for concern.

Benjamin Graham

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Benjamin Graham
Age: 82 †
Born: 1894
Born: May 8
Died: 1976
Died: September 21
Economist
Financier
Investor
University Teacher
Writer
London
England
Useful
Investment
Concern
Cause
Disappearance
Causes
Stocks
Common
Speculation
Always
Distinction
Investing

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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).
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Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of good business conditions. The purchasers view the good current earnings as equivalent to 'earning power' and assume that prosperity is equivalent to safety.
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You must never delude yourself into thinking that you're investing when you're speculating.
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An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.
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The qualitative factors upon which most stress is laid are the nature of the business and the character of the management. These elements are exceedingly important, but they are also exceedingly difficult to deal with intelligently.
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In an ideal world, the intelligent investor would hold stocks only when they are cheap and sell them when they become overpriced, then duck into the bunker of bonds and cash until stocks again become cheap enough to buy.
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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.
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Every corporate security may be best viewed, in the first instance, as an ownership interest in, or a claim against, a specific business enterprise.
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The investor's chief problem - and even his worst enemy - is likely to be himself.
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The essence of investment management is the management of risks, not the management of returns.
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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.
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If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.
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Do not let anyone else run your business
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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.
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Stock speculation is largely a matter of A trying to decide what B, C and D are likely to think-with B, C and D trying to do the same.
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The only thing you should do with pro forma earnings is ignore them.
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The beauty of periodic rebalancing is that it forces you to base your investing decisions on a simple, objective standard.
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The money cost of the reservoir plan literally fades into insignificance when it is compared with the financial burden which the great depression imposed on the nation.
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Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it – even though others may hesitate or differ.
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No matter how careful you are, the one risk no investor can ever eliminate is the risk of being wrong. Only by insisting on what Graham called the margin of safety - never overpaying, no matter how exciting an investment seems to be - can you minimize your odds of error.
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