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There is a close logical connection between the concept of a safety margin and the principle of diversification.

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
Concepts
Margins
Close
Logical
Principles
Connection
Investing
Concept
Principle
Connections
Diversification
Safety
Margin

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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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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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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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A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.
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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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Why should the cotton growers suffer if there is shortage of wheat?
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An investor calculates what a stock is worth, based on the value of its businesses.
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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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Both individual skill (art) and chance are important factors in determining success or failure.
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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 ideal form of common stock analysis leads to a valuation of the issue which can be compared with the current price to determine whether or not the security is an attractive purchase.
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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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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 investor's chief problem - and even his worst enemy - is likely to be himself.
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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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A stock is not just a ticker symbol or an electronic blip it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.
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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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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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Stocks can be dynamite.
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