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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.

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
Especially
Purchased
Security
Defensive
Changed
Excessive
Issues
Apparently
Even
Replaced
Much
Advance
Priced
Time
Reasonable
Securities
Investing
Portfolios

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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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Both individual skill (art) and chance are important factors in determining success or failure.
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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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The individual investor should act consistently as an investor and not as a speculator. This means ... that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase.
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The only thing you should do with pro forma earnings is ignore them.
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Avoid second-quality issues in making up a portfolio unless they are demonstrable bargains.
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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 earnings power through economic changes or deterioration in management.
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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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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.
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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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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.
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The market is always making mountains out of molehills and exaggerating ordinary vicissitudes into major setbacks.
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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.
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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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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.
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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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