Quotes from Benjamin Graham

The investor should impose some limit on the price he will pay for an issue in relation to its average earnings over, say, the past seven years. We suggest that this limit be set at 25 times such average earnings, and not more than 20 times those of the last twelve-month period.

Experience teaches that the time to buy preferred stocks is when their price is unduly depressed by temporary adversity. (At such times they may be well suited to the aggressive investor but too unconventional for the defensive investor.)

The intelligent investor realizes that stocks become more risky, not less, as their prices rise—and less risky, not more, as their prices fall. The intelligent investor dreads a bull market, since it makes stocks more costly to buy. And conversely (so long as you keep enough cash on hand to meet your spending needs), you should welcome a bear market, since it puts stocks back on sale.

all suggest looking at the daily list of new 52-week lows in the Wall Street Journal or the similar table in the "Market Week" section of Barron's. That will point you toward stocks and industries that are unfashionable or unloved and that thus offer the potential for high returns once perceptions change.

Hence, after this foreshortened discussion of the major considerations, we once again enunciate the same basic compromise policy for defensive investors—namely that at all times they have a significant part of their funds in bond-type holdings and a significant part also in equities.

It is still true that they may choose between maintaining a simple 50–50 division between the two components or a ratio, dependent on their judgment, varying between a minimum of 25% and a maximum of 75% of either.

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.

Rising prices allow Uncle Sam to pay off his debts with dollars that have been cheapened by inflation. Completely eradicating inflation runs against the economic self-interest of any government that regularly borrows money.

He also wants to see managers who set and meet realistic goals; build their businesses from within rather than through acquisition; allocate capital wisely; and do not pay themselves hundred-million-dollar jackpots of stock options.

something foolish, something creative and something generous.

Take the five stocks in the Dow Jones Industrial Average with the lowest stock prices and highest dividend yields. Discard the one with the lowest price. Put 40% of your money in the stock with the second-lowest price. Put 20% in each of the three remaining stocks. One year later, sort the Dow the same way and reset the portfolio according to steps 1 through 4. Repeat until wealthy.

Walter Lippmann spoke of men who plant trees that other men will sit under. Ben Graham was such a man.

At some point in its life, almost every stock is a bargain; at another time, it will be expensive. Although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go.

Read backwards. When you research a company's financial reports, start reading on the last page and slowly work your way toward the front. Anything that the company doesn't want you to find is buried in the back—which is precisely why you should look there first.

Today's defensive investor can do even better—by buying a total stock-market index fund that holds essentially every stock worth having. A low-cost index fund is the best tool ever created for low-maintenance stock investing—and any effort to improve on it takes more work (and incurs more risk and higher costs) than a truly defensive investor can justify.

implied that "at normal levels of the market" the investor should be able to obtain an  initial  dividend  return  of  between  31?2%  and  41?2%  on  his  stock purchases, to which should be added a steady increase in underly- ing value (and in the "normal market price") of a representative

Evidently it is not only the tyro who needs to be warned that while enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.

A company can be a giant, or it can deserve a giant P/E ratio, but both together are incompossible.

One technique that can be helpful: See which leading professional money managers own the same stocks you do. If one or two names keep turning up, go to the websites of those fund companies and download their most recent reports. By seeing which other stocks these investors own, you can learn more about what qualities they have in common; by reading the managers' commentary, you may get ideas on how to improve your own approach.3

Of course, wonders can be accomplished with the right individual selections, bought at the right levels, and later sold after a huge rise and before the probable decline. But the average investor can no more expect to accomplish this than to find money growing on trees.

Another modern development of relevance is the ubiquitous cable television coverage of the stock market. This frenetic lunacy exacerbates the already short-term orientation of most investors. It foments the view that it is possible—or even necessary—to have an opinion on everything pertinent to the financial markets, as opposed to the patient and highly selective approach endorsed by Graham and Dodd.

Finally, most of the high returns on IPOs are captured by members of an

1970 1969 Share earningsa $5.20 $5.58

If your investment horizon is long—at least 25 or 30 years—there is only one sensible approach: Buy every month, automatically, and whenever else you can spare some money. The single best choice for this lifelong holding is a total stock-market index fund. Sell only when you need the cash