Quotes About Strategy

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.

You should always remember, in the words of psychologist Paul Slovic, that risk is brewed from an equal dose of two ingredients - probabilities and consequences. Before you invest, you must ensure that you have realistically assessed your probability of being right and how you will react to the consequences of being wrong.

para disfrutar de una probabilidad razonable de obtener unos resultados continuados mejores que la media, el inversor debe seguir unas políticas que sean (1) inherentemente sensatas, firmes y prometedoras, y (2) que no gocen de popularidad en el mercado de valores.

The Best Defense is a Good Offense

A strong-minded approach to investment, firmly based on the margin-of-safety principle, can yield handsome rewards. But a decision to try for these emoluments rather than for the assured fruits of defensive investment should not be made without much self-examination.

We recommended that the investor divide his holdings between high-grade bonds and leading common stocks; that the proportion held in bonds be never less than 25% or more than 75%, with the converse being necessarily true for the common-stock component; that his simplest choice would be to maintain a 50–50 proportion between the two, with adjustments to restore the equality when market developments had disturbed it by as much as, say, 5%.

don't invest in only one stock—or even just a handful of different stocks. Unless you are not willing to spread your bets, you shouldn't bet at all. Graham's guideline of owning between 10 and 30 stocks remains a good starting point for investors who want to pick their own stocks, but you must make sure that you are not overexposed to one industry.

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.

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

day trading—holding stocks for a few hours at a time—is one of the best weapons ever invented for committing financial suicide.

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

the practitioner invests in common stocks the same number of dollars each month or each quarter. In this way he buys more shares when the market is low than when it is high, and he is likely to end up with a satisfactory overall price for all his holdings.

The intelligent investor dreads a bull market, since it makes stocks more costly to buy.

But the intelligent investor has no interest in being temporarily right. To reach your long-term financial goals, you must be sustainably and reliably right.

It is our view that stock-market timing cannot be done, with general success, unless the time to buy is related to an attractive price level, as measured by analytical standards. Similarly

you must deliberately protect yourself against serious losses; you must aspire to "adequate," not extraordinary, performance.

Graham's guideline of owning between 10 and 30 stocks remains a good starting point for investors who want to pick their own stocks, but you must make sure that you are not overexposed to one industry.

The ideal way to dollar-cost average is into a portfolio of index funds, which own every stock or bond worth having. That way, you renounce not only the guessing game of where the market is going but which sectors of the market—and which particular stocks or bonds within them—will do the best.

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.

For most investors, allocating at least 10% of your retirement assets to TIPS is an intelligent way to keep a portion of your money absolutely safe—and entirely beyond the reach of the long, invisible claws of inflation.

El inversor inteligente es un realista que vende a optimistas y compra a pesimistas.

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 one principle that applies to nearly all these so-called "technical approaches" is that one should buy because a stock or the market has gone up and one should sell because it has declined. This is the exact opposite of sound business sense everywhere else, and it is most unlikely that it can lead to lasting success on Wall Street.