Quotes About Finance

Hold an index fund for 20 years or more, adding new money every month, and you are all but certain to outper-forms the vast majority of professional and individual investors alike. Late in his life, Graham praised index funds as the best choice for individual investors, as does Warren Buffett.6

the art of successful investment lies first in the choice of those industries that are most likely to grow in the future and then in identifying the most promising companies in these industries.

Likewise, investors were delighted to earn 11% on bank certificates of deposit (CDs) in 1980 and are bitterly disappointed to be earning only around 2% in 2003—even though they were losing money after inflation back then but are keeping up with inflation now.

Many skeptics, it is true, are inclined to dismiss the whole procedure [chart reading] as akin to astrology or necromancy; but the sheer weight of its importance in Wall Street requires that its pretensions be examined with some degree of care.

But make sure you remember this: The people who now claim that the next "sure thing" will be health care, or energy, or real estate, or gold, are no more likely to be right in the end than the hypesters of high tech turned out to be.

But in other cases, making allowance for conversion rights—and the existence of stock-purchase warrants—can reduce the apparent earnings by half, or more.

Many Internet IPOs rose 1,000% or more in 1999 and early 2000; most of them lost more than 95% in the subsequent three years. How could these early gains earned by a few investors justify the massive destruction of wealth suffered by the millions who came later? Many IPOs were, in fact, deliberately underpriced to "manufacture" immediate gains that would attract more attention for the next offering.

A reduction in common-stock holdings where needed to bring it down to a maximum of 50 per cent of the total portfolio. The capital-gains tax must be paid with as good grace as possible, and the proceeds invested in first-quality bonds or held as a savings deposit.

Instead of listening to Hoffman and his lapdog analysts, traders should have heeded the honest warning in Commerce One's annual report for 1999: "We have never been profitable. We expect to incur net losses for the foreseeable future and we may never be profitable.

the readers to buy their stocks as they bought their groceries, not as they bought their perfume

Lucent's stock, at $51.062 on June 30, 2000, finished 2002 at $1.26—a loss of nearly $190 billion in market value in two-and-a-half years.

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

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.

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

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.

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

Thus, in sum, we say that to have a true investment there must be present a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.

Principle of Optimum Capitalization Structure.