Quotes About Investment

But this may be the place to remark that the very fact that the unit costs of electricity, gas, and telephone services have advanced so much less than the general price index puts these companies in a strong strategic position for the future.3 They are entitled by law to charge rates sufficient for an adequate return on their invested capital, and this will probably protect their shareholders in the future as it has in the inflations of the past.

generally speaking there can be no high-grade obligations of a weak enterprise.

All of the above brings us back to our conclusion that the investor has no sound basis for expecting more than an average overall return of, say, 8% on a portfolio of DJIA-type common stocks purchased at the late 1971 price level. But even if these expectations should prove to be understated by a substantial amount, the case would not be made for an all-stock investment program.

Se você não tem como prever o comportamento dos mercados, precisa aprender a prever e controlar o seu próprio.

And I suspect that Graham and Dodd have been ignored by those who suffer from the misconception that trying to make serious money requires that one take serious risks.

An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return."1 Note that investing, according to Graham, consists equally of three elements:

1. There should be adequate though not excessive diversification. This might mean a minimum of ten different issues and a maximum of about thirty.†

Without a saving faith in the future, no one would ever invest at all.

Principle for the securities analyst: Nearly every issue might conceivably be cheap in one price range and dear in another.

Quien se conforme con ganancias seguras, difícilmente llegará a amasar grandes riquezas; quien lo fíe todo a grandes aventuras, frecuentemente quebrará y caerá en la pobreza: es bueno, por lo tanto, proteger las aventuras con los frutos de la certidumbre para que puedan soportar las pérdidas. Sir Francis Bacon

Today's investor is so concerned with anticipating the future that he is already paying handsomely for it in advance. Thus what he has projected with so much study and care may actually happen and still not bring him any profit. If it should fail to materialize to the degree expected he may in fact be faced with serious temporary and perhaps even permanent loss.

Security analysis does not assume that a past average will be repeated, but only that it supplies a rough index to what may be expected of the future. A trend, however, cannot be used as a rough index; it represents a definite prediction of either better or poorer results, and it must be either right or wrong.

High valuations entail high risks.

By the time everyone decides that a given industry is "obviously" the best one to invest in, the prices of its stocks have been bid up so high that its future returns have nowhere to go but down.

The recurrent excesses of its advances and declines are due at bottom to the fact that, when values are determined chiefly by the outlook, the resultant judgments are not subject to any mathematical controls and are almost inevitably carried to extremes.

In the previous four quarters, Yahoo! had racked up $433 million in revenues and $34.9 million in net income. So Yahoo!'s stock was now priced at 263 times revenues and 3,264 times earnings. (Remember that a P/E ratio much above 25 made Graham grimace!)5

The future value of every investment is a function of its present price. The higher the price you pay, the lower your return will be.

particularly as to whether they have a clear concept of the differences between investment and speculation and between market price and underlying value.

Buying a bond only for its yield is like getting married only for the sex. If the thing that attracted you in the first place dries up, you'll find yourself asking, "What else is there?" When the answer is "Nothing," spouses and bondholders alike end up with broken hearts.

Such an investor may for example be a buyer of air-transport stocks because he believes their future is even more brilliant than the trend the market already reflects. For this class of investor the value of our book will lie more in its warnings against the pitfalls lurking in this favorite investment approach than in any positive technique that will help him along his path.

Investment must always consider the price as well as the quality of the security.

An investment operation is one that can be justified on both qualitative and quantitative grounds.

Is the stock market riskier today than two years ago simply because prices are higher? The answer is no." But the answer is yes. It always has been. It always will be.

We should advise rather strongly against the initiation of a new dollar-averaging plan at the late 1964 levels, since many investors would not have the stamina to pursue such a scheme if the results soon after initiation should appear highly unfavorable.