An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.
In security analysis the prime stress is laid upon protection against untoward events. We obtain this protection by insisting upon margins of safety, or values well in excess of the price paid.
In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.
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.
The idea of storage as a solution of economic problems at least has the support of common sense.It is diametrically opposed to the topsy-turvy Alice-in-Wonderland reasoning that has marked so much of our depression thinking and policy.
Whenever the investor sold out in an upswing as soon as the top level of the previous well-recognized bull market was reached, he had a chance in the next bear market to buy back at one third (or better) below his selling price.
The genuine investor in common stocks does not need a great equipment of brain and knowledge, but he does need some unusual qualities of character
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.
A speculator gambles that a stock will go up in price because somebody else will pay even more for it.
No statement is more true and better applicable to Wall Street than the famous warning of Santayana: "Those who do not remember the past are condemned to repeat it".
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.
There is a close logical connection between the concept of a safety margin and the principle of diversification.
Never mingle your speculative and investment operations in the same account nor in any part of your thinking.
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.
It is absurd to think that the general public can ever make money out of market forecasts.
The investor's primary interest lies in acquiring and holding suitable securities at suitable prices.
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.
Abnormally good or abnormally bad conditions do not last forever.
The volume of credit depends upon three factors: the desire to borrow, the ability to lend and the desire to lend.
Unusually rapid growth cannot keep up forever; when a company has already registered a brilliant expansion, its very increase in size makes a repetition of its achievement more difficult.
The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future.
To enjoy a reasonable chance for continued better than average results, the investor must follow policies which are (1) inherently sound and promising, and (2) not popular on Wall Street.
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.
The story of Joseph in Egypt and of the seven fat and the seven lean years has passed into the homely wisdom of the ages; but our economic thinking seems to have lost contact with so simple and basic approach to prudent management of a nations welfare.
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.
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