Quote

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.

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
Long
Response
Bond
Aware
Principal
Changes
Investors
Term
Investing
Unquestioned
Though
Price
Investor
Interest
Safety
Widely
May
Rate
Vary
Even
Market
Rates

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The investor's primary interest lies in acquiring and holding suitable securities at suitable prices.
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The chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.
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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.
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When somebody asserts that a stock has an earning power of so much, I am sure that the person who hears him doesn't know what he means, and there is a good chance that the man who uses it doesn't know what it means.
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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.
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Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.
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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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A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.
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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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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.
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Knowledge is only one ingredient on arriving at a stock's proper price. The other ingredient, fully as important as information, is sound judgment.
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Abnormally good or abnormally bad conditions do not last forever.
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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.
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Speculators often prosper through ignorance it is a cliché that in a roaring bull market knowledge is superfluous and experience is a handicap. But the typical experience of the speculator is one of temporary profit and ultimate loss
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Stocks can be dynamite.
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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 judgment on price versus value with the smallest possible sums.
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It's nonsensical to derive a price/earnings ratio by dividing the known current price by unknown future earnings.
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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.
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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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Before you invest, you must ensure that you have realistically assessed your probability of being right and how you will react to the consequences of being wrong.
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