Quotes from Benjamin Graham

I quickly convinced myself that the true key to material happiness lay in a modest standard of living which could be achieved with little difficulty under almost all economic conditions"—the margin-of-safety idea applied to personal finance.21

Human felicity is produc'd not so much by great Pieces of good Fortune that seldom happen, as by little Advantages that occur every day. —Benjamin Franklin

The real money in investment will have to be made- as most of it has been in the past- not out of buying and selling but of owning and holding securities, receiving interest and dividends and increases in value. pxvii

Dividend Record. One of the most persuasive tests of high quality is an uninterrupted record of dividend payments going back over many years. We think that a record of continuous dividend payments for the last 20 years or more is an important plus factor in the company's quality rating. Indeed the defensive investor might be justified in limiting his purchases to those meeting this test.

The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bring to bear on his task.

Everybody knows that most people who trade in the market lose money at it in the end. The people who persist in trying it are either (a) unintelligent, or (b) willing to lose money for the fun of the game, or (c) gifted with some uncommon and incommunicable talent. In any case they are not investors. p12

After all, the whole point of investing is not to earn more money than average, but to earn enough money to meet your own needs.

The third is the device of "dollar-cost averaging," which means simply that the practitioner invests in common stocks the same number of dollars each month or each quarter. In this way he buys more shares

It's expensive to trade small lots of convertible bonds, and diversification is impractical unless you have well over $100,000 to invest in this sector alone. Fortunately, today's intelligent investor has the convenient recourse of buying a low-cost convertible bond fund. Fidelity and Vanguard offer mutual funds with annual expenses comfortably under 1%, while several closed-end funds are also available at a reasonable cost (and, occasionally, at discounts to net asset value).4

can be so dangerous; the more you know going in, the less likely you are to probe a stock for weaknesses. This pernicious form of overconfidence is called "home

A comparison of eToys with Toys "R" Us, Inc.—its biggest rival—is shocking. In the preceding three months, Toys "R" Us had earned $27 million in net income and had sold over 70 times more goods than eToys had sold in an entire year. And yet as Figure 17-3 shows, the stock market valued eToys at nearly $2 billion more than Toys "R" Us.

We must recognize, however, that intrinsic value is an elusive concept.

This has fluctuated, of course, with the general rate of economic activity, but it has shown no general tendency to advance with wholesale prices or the cost of living.

In 1982, his biggest investment was Treasury bonds; right after that, he made Chrysler his top holding, even though most experts expected the automaker to go bankrupt; then, in 1986, Lynch put almost 20% of Fidelity Magellan in foreign stocks like Honda, Norsk Hydro, and Volvo. So, before you buy a U.S. stock fund, compare the holdings listed in its latest report against the roster of the S & P 500 index; if they look like Tweedledee and Tweedledum, shop for another fund.7

Usually labeled "summary of significant accounting policies," one key note describes how the company recognizes revenue, records inventories, treats installment or contract sales, expenses its marketing costs, and accounts for the other major aspects of its business.

the really dreadful losses" always occur after "the buyer forgot to ask 'How much?'" Most painfully of all, by losing their self-control just when they needed it the most, these people proved Graham's assertion that "the investor's chief problem—and even his worst enemy—is likely to be himself.

Here are some quick considerations for the intelligent investor: Is the "net pension benefit" more than 5% of the company's net income? (If so, would you still be comfortable with the company's other earnings if those pension gains went away in future years?) Is the assumed "long-term rate of return on plan assets" reasonable? (As of 2003, anything above 6.5% is implausible, while a rising rate is downright delusional.)

Never mingle your speculative and investment operations in the same account, nor in any part of your thinking.

Three solid books full of timely and specific examples are Martin Fridson and Fernando Alvarez's Financial Statement Analysis, Charles Mulford and Eugene Comiskey's The Financial Numbers Game, and Howard Schilit's Financial Shenanigans.

just as in 1929 the companion theory for the "blue chips" was that no price was too high for them because their future possibilities were limitless.

Some companies with an exemplary record of shutting their own gates are Longleaf, Numeric, Oakmark, T. Rowe Price, Vanguard, and Wasatch.

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

Today's investors have forgotten Graham's message. They put most of their effort into buying a stock, a little into selling it - but none into owning it. Certainly, Graham reminds us, there is just as much reason to exercise care and judgment in being as in becoming a stockholder.

There's no good reason ever to pay more than these levels of annual operating expenses, by fund category: Taxable and municipal bonds: 0.75% U.S. equities (large and mid-sized stocks): 1.0% High-yield (junk) bonds: 1.0% U.S. equities (small stocks): 1.25% Foreign stocks: 1.50%9