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Avoid second-quality issues in making up a portfolio unless they are demonstrable bargains.

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
Bargains
Investing
Avoid
Unless
Second
Issues
Demonstrable
Quality
Portfolio
Making
Portfolios

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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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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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It's nonsensical to derive a price/earnings ratio by dividing the known current price by unknown future earnings.
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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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Nothing important on Wall Street can be counted on to occur exactly in the same way as it happened before.
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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 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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The intelligent investor is a realist who sells to optimists and buys from pessimists.
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At heart, uncertainty and investing are synonyms.
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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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In the short run, the market is a voting machine, but in the long run it is a weighing machine.
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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.
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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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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.
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In the financial markets, hindsight is forever 20/20, but foresight is legally blind. And thus, for most investors, market timing is a practical and emotional impossibility.
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The only thing you should do with pro forma earnings is ignore them.
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The investor's chief problem - and even his worst enemy - is likely to be himself.
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We define a bargain issue as one which, on the basis of facts established by analysis, appears to be worth considerably more that it is selling for.
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It requires strength of character in order to think and to act in opposite fashion from the crowd and also patience to wait for opportunities that may be spaced years apart.
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In other words, the market is not a weighing machine, on which the value of each issue is recorded by an exact and impersonal mechanism, in accordance with its specific qualities. Rather should we say that the market is a voting machine, whereon countless individuals register choices which are the product partly of reason and partly of emotion.
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