In 2001, I wrote about Ben Graham and his Margin of Safety:
Creating Wealth Through the Power of Compound Growth
Ben Graham, 1894-1976…
Warren Buffett has referred to Benjamin Graham’s The Intelligent Investor as “by far the best book on investing ever written.” John Train, a former super Forbes columnist, wrote, “Graham ranks as this century’s (and perhaps history’s) most important thinker on applied portfolio investment.”
In the preface to Graham’s fourth revised edition printed in 1973, W.B. wrote, “It is rare that the founder of a discipline does not find his work eclipsed in rather short order by successors. But over forty years after publication of the book (first written in 1949) that brought structure and logic to a disorderly and confused activity, it is difficult to think of possible candidates for even the runner-up position in the field of security analysis.”
In preparation for writing to you this month, I reread The Intelligent Investor in order to be able to give you a little of the meat from Ben Graham’s seminal work. I practice these principles myself in my own investing, for my family accounts, and for you. I hope you’ll benefit from my Benjamin Graham menu for the rest of your investing days.
Your Cornerstone
- “Diversification is an established tenet of conservative investment. By accepting it so universally, investors are really demonstrating their acceptance of the margin-of-safety principle, to which diversification is the companion.”
- “The ‘aggressive’ investor should start from the same base as the defensive investor, namely, a division of his funds between high-grade bonds and high-grade common stocks bought at reasonable prices.”
- “To enjoy a reasonable chance for continued better than average results, the investor must follow policies which are (1) inherently sound and promising, and (2) not popular in Wall Street.”
- “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.”
- “Stock trading is not an operation which, on thorough analysis, offers safety of principal and a satisfactory return.”
- “Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook.”
- “In an astonishingly large proportion of the trading in common stocks, those engaged therein don’t appear to know–in polite terms–one part of their anatomy from another.”
These words remain as true today as they were then.