Quotes About Finance

dollar-cost averaging," which means simply that the practitioner invests in common stocks the same number of dollars each month or each quarter.

The few good annuities are bought, not sold; if an annuity produces fat commissions for the seller, chances are it will produce meager results for the buyer. Consider only those you can buy directly from providers with rock-bottom costs like Ameritas, TIAA-CREF, and Vanguard.

Because so few investors have the guts to cling to stocks in a falling market, Graham insists that everyone should keep a minimum of 25% in bonds. That cushion, he argues, will give you the courage to keep the rest of your money in stocks even when stocks stink.

Benjamin Graham

In the financial markets, hindsight is forever 20/20, but foresight is legally blind.

If you receive a 2% raise in a year when inflation runs at 4%, you will almost certainly feel better than you will if you take a 2% pay cut during a year when inflation is zero. Yet both changes in your salary leave you in a virtually identical position—2% worse off after inflation.

A great company is not a great investment if you pay too much for the stock.

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. Over

If you receive a 2% raise in a year when inflation runs at 4%, you will almost certainly feel better than you will if you take a 2% pay cut during a year when inflation is zero. Yet both changes in your salary leave you in a virtually identical position—2% worse off after inflation. So long as the nominal (or absolute) change is positive, we view it as a good thing—even if the real (or after-inflation) result is negative.

But if a broker ever tries to sell you an individual mortgage bond or "CMO," tell him you are late for an appointment with your proctologist.

Each company should have a long record of continuous dividend payments. (All the issues in the Dow Jones Industrial Average met this dividend requirement in 1971.) To be specific on this point we would suggest the requirement of continuous dividend payments beginning at least in 1950.

An offering of New Housing issues in July 1971 yielded as high as 5.8%, free from both Federal and state taxes, while an issue of (taxable) New Community debentures sold in September

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.

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.

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.

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.

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.

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

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

guiding rule that the investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequent inverse range of between 75% and 25% in bonds.

Conversely, sound procedure would call for reducing the common-stock component below 50% when in the judgment of the investor the market level has become dangerously high.

Once you lose 95% of your money, you have to gain 1,900% just to get back to where you started.