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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
Investing
Useful
Investment
Concern
Cause
Disappearance
Causes
Stocks
Common
Speculation
Always
Distinction

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The intelligent investor should recognize that market panics can create great prices for good companies and good prices for great companies.
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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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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.
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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.
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It always seemed, and still seems, ridiculously simple to say that if one can acquire a diversified group of common stocks at a price less than the applicable net current assets alone - after deducting all prior claims, and counting as zero the fixed and other assets - the results should be quite satisfactory.
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The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists.
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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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An investor calculates what a stock is worth, based on the value of its businesses.
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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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Always remember that market quotations are there for convenience, either to be taken advantage of or to be ignored.
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Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed.
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To establish the right price for a stock, the market must have adequate information, but it by no means follows that is the market has this information it will thereupon establish the right price.
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The stock market resembles a huge laundry in which institutions take in large blocks of each others washing ... without rhyme or reason.
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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.
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The investor's chief problem - and even his worst enemy - is likely to be himself.
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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.
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Nothing important on Wall Street can be counted on to occur exactly in the same way as it happened before.
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The intelligent investor is a realist who sells to optimists and buys from pessimists.
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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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In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.
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