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

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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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Stock speculation is largely a matter of A trying to decide what B, C and D are likely to think-with B, C and D trying to do the same.
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If we assume that there are normal or standard income results to be obtained from investing money in securities, then the role of the adviser can be more readily established. He will use his superior training and experience to protect his clients against mistakes and to make sure that they obtain the results to which their money is entitled.
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Though business conditions may change, corporations and securities may change, and financial institutions and regulations may change, human nature remains the same. Thus the important and difficult part of sound investment, which hinges upon the investor's own temperament and attitude, is not much affected by the passing years.
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The correct attitude of the security analyst toward the stock market might well be that of a man toward his wife. He shouldn't pay too much attention to what the lady says, but he can't afford to ignore it entirely. That is pretty much the position that most of us find ourselves vis-à-vis the stock market.
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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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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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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 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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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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Successful investment may become substantially a matter of techniques and criteria that are learnable, rather than the product of unique and incommunicable mental powers.
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There is no reason to feel any shame in hiring someone to pick stocks or mutual funds for you. But there's one responsibility that you must never delegate. You, and no one but you, must investigate whether an adviser is trustworthy and charges reasonable fees.
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If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.
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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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Why should the cotton growers suffer if there is shortage of wheat?
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Only in the exceptional case, where the integrity and competence of the advisers have been thoroughly demonstrated, should the investor act upon the advice of others without understanding and approving the decision made.
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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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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 investor's chief problem - and even his worst enemy - is likely to be himself.
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