Benjamin Graham's Timeless Advice

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Posted by GuruFocus.com

on Thursday, 22 February 2018 06:00

Born in 1894, Graham, author of the Intelligent Investor worked in managerial economics and investing which led to value investing within mutual funds, hedge funds, diversified holding companies. Throughout his career, Graham had many notable disciples who went on to receive substantial success in the world of investment, including Warren Buffett who described him as "the most influential person in his life after my own father" - Robert Zurrer for Money Talks

bjOf all the well-known investors out there today, none has a reputation that comes anywhere near that of Benjamin Graham. Even though this godfather of investing has been dead for many years, he still shapes the investment ideas and styles of thousands of investors alive today thanks to his timeless advice.

Indeed, despite the fact that the financial world has changed tremendously since Graham’s death, his advice is still highly relevant as, as he once said, “The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.”

Below I’ve gathered some more quotes from Graham, which provide an insight into his way of thinking, and when taken together, offer a sort of guide for investors of all experiences on how to invest and think about the markets. I guarantee you’ll take something away from the below. Even if you’ve been an investor for many decades, it’s always sensible to remind yourself of the principles of sound investment, so you don’t stray into bad habits.

Benjamin Graham's timeless advice 

“The individual investor should act consistently as an investor and not as a speculator. This means... that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase.”

“The stock investor is neither right or wrong because others agreed or disagreed with him; he is right because his facts and

analysis are right.”


“The investor’s chief problem and even his worst enemy is likely to be himself.”

This was the single most important quote Graham has issued. It’s so important that every investor understands her weaknesses and her place in the world. You are not going to be the next Warren Buffett (TradesPortfolio), so don’t try to be. Understand your drawbacks and invest accordingly. If you don’t, and you overtrade, invest in something you don’t understand or try to be clever, the results can be disastrous. As Charlie Munger (TradesPortfolio) once said, “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent."

Back to Graham’s timeless advice:

“Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.”

“The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.”

“Mr. Market’s job is to provide you with prices; your job is to decide whether it is to your advantage to act on them. You do not have to trade with him just because he constantly begs you to.”

“The best way to measure your investing success is not by whether you’re beating the market but by whether you have put in place a financial plan and a behavioral discipline that are likely to get you where you want to go."

“Losing some money is an inevitable part of investing, and there’s nothing you can do to prevent it. But to be an intelligent investor, you must take responsibility for ensuring that you never lose most or all of your money.”


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