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Reblog: 74 Quotes From The Intelligent Investor, Revised Edition

While preparing for The Intelligent Investor Book Review, I underlined the great quotes from the book. They provide an interesting and valuable perspective of, what may be, the greatest investing book ever written. I have included the page number for each quote for easy reference.

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Timeless Investing Quotes from The Intelligent Investor:

To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. (pg. ix)
The sillier the market’s behavior, the greater the opportunity for the business like investor. (pg. ix)
The intelligent investor is a realist who sells to optimists and buys from pessimists. (pg. xiii)
No matter how careful you are, the one risk no investor can ever eliminate is the risk of being wrong. 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. (pg. xiii)
By developing your discipline and courage, you can refuse to let other people’s mood swings govern your financial destiny. In the end, how your investments behave is much less important than how you behave. (pg. xiii)
The purpose of this book is to supply, in the form suitable for laymen, guidance in the adoption and execution of an investment policy. (pg. 1)
No statement is more true and better applicable to Wall Street than the famous warning of Santayana: “Those who do not remember the past are condemned to repeat it”. (pg. 1)
We have not known a single person who has consistently or lastingly make money by thus “following the market”. We do not hesitate to declare this approach is as fallacious as it is popular. (pg. 3)
The defensive (or passive) investor will place chief emphasis on the avoidance of serious mistakes or losses. His second aim will be freedom from effort, annoyance, and the need for making frequent decisions. (pg. 6)
The determining trait of the enterprising (or active, or aggressive) investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than the average. (pg. 6)
The investor’s chief problem – and even his worst enemy – is likely to be himself. (pg. 8)
For 99 issues out of 100 we could say that at some price they are cheap enough to buy and at some price they would be so dear that they would be sold. (pg. 8)
The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is cause for concern. (pg. 20)
Never mingle your speculative and investment operations in the same account nor in any part of your thinking. (pg. 22)
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 on Wall Street. (pg. 31)
Speculative stock movements are carried too far in both directions, frequently in the general market and at all times in at least some of the individual issues. (pg. 31)
An investor calculates what a stock is worth, based on the value of its businesses. (pg. 36)
A speculator gambles that a stock will go up in price because somebody else will pay even more for it. (pg. 36)
People who invest make money for themselves; people who speculate make money for their brokers. And that, in turn, is why Wall Street perennially downplays the durable virtues of investing and hypes the gaudy appeal of speculation. (pg. 36)
Confusing speculation with investment is always a mistake. (pg. 36)
The value of any investment is, and always must be, a function of the price you pay for it. (pg. 83)
The most striking thing about Graham’s discussion of how to allocate your assets between stocks and bonds is that he never mentions the word “age”. (pg. 102)
The beauty of periodic rebalancing is that it forces you to base your investing decisions on a simple, objective standard. (pg. 105)
We urge the beginner in security buying not to waste his efforts and his money in trying to beat the market. Let him study security values and initially test out his judgment on price versus value with the smallest possible sums. (pg. 120)
There is no reason to feel any shame in hiring someone to pick stocks or mutual funds for you. But there’s one responsibility that you must never delegate. You, and no one but you, must investigate whether an adviser is trustworthy and charges reasonable fees. (pg. 129)
Thousands of people have tried, and the evidence is clear: The more you trade, the less you keep. (pg. 149)
We define a bargain issue as one which, on the basis of facts established by analysis, appears to be worth considerably more that it is selling for. (pg. 166)
In an ideal world, the intelligent investor would hold stocks only when they are cheap and sell them when they become overpriced, then duck into the bunker of bonds and cash until stocks again become cheap enough to buy. (pg. 179)
In the financial markets, hindsight is forever 20/20, but foresight is legally blind. And thus, for most investors, market timing is a practical and emotional impossibility. (pg. 180)
A great company is not a great investment if you pay too much for the stock. (pg. 181)
The intelligent investor gets interested in big growth stocks not when they are at their most popular – but when something goes wrong. (pg. 183)
It is absurd to think that the general public can ever make money out of market forecasts. (pg. 190)
It should be remembered that a decline of 50% fully offsets a preceding advance of 100%. (pg. 192)
Even the intelligent investor is likely to need considerable will power to keep from following the crowd. (pg. 197)
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. (pg. 205)
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. (pg. 205)
Always remember that market quotations are there for convenience, either to be taken advantage of or to be ignored. (pg. 206)
Never buy a stock because it has gone up or sell one because it has gone down. (pg. 206)
The investor should be aware that even though safety of its principal and interest may be unquestioned, a long term bond could vary widely in market price in response to changes in interest rates. (pg. 207)
Nothing important on Wall Street can be counted on to occur exactly in the same way as it happened before. (pg. 208)
Mr. Market does not always price stocks the way an appraiser or a private buyer would value a business. Instead, when stocks are going up, he happily pays more than their objective value; and, when they are going down, he is desperate to dump them for less than their true worth. (pg. 213)
The intelligent investor shouldn’t ignore Mr. Market entirely. Instead, you should do business with him- but only to the extent that it serves your interests. (pg. 215)
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 no not have to trade with hime just because he constantly begs you to. (pg. 215)
Investing isn’t about beating others at their game. It’s about controlling yourself at your own game. (pg. 219)
The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go. (pg. 220)
Only in the exceptional case, where the integrity and competence of the advisers have been thoroughly demonstrated, should the investor act upon the advice of others without understanding and approving the decision made. (pg. 271)
Before you place your financial future in the hands of an adviser, it’s imperative that you find someone who not only makes you comfortable but whose honesty is beyond reproach. (pg. 274)
If fees consume more than 1% of your assets annually, you should probably shop for another adviser. (pg. 277)
The ideal form of common stock analysis leads to a valuation of the issue which can be compared with the current price to determine whether or not the security is an attractive purchase. (pg. 288)
The only thing you should do with pro forma earnings is ignore them. (pg. 323)
High valuations entail high risks. (pg. 335)
Even defensive portfolios should be changed from time to time, especially if the securities purchased have an apparently excessive advance and can be replaced by issues much more reasonable priced. (pg. 360)
A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market. (pg. 371)
The best values today are often found in the stocks that were once hot and have since gone cold. (pg. 371)
It’s nonsensical to derive a price/earnings ratio by dividing the known current price by unknown future earnings. (pg. 374)
Calculate a stock’s price/earnings ratio yourself, using Graham’s formula of current price divided by average earnings over the past three years. (pg. 374)
Avoid second-quality issues in making up a portfolio unless they are demonstrable bargains. (pg. 389)
To see how much a company is truly earning on the capital it deploys in its businesses, look beyond EPS to Return on Invested Capital (ROIC). (pg. 398)
Wall Street has a few prudent principles; the trouble is that they are always forgotten when they are most needed. (pg. 409)
Although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go. (pg. 473)
In the short run the market is a voting machine, but in the long run it is a weighing machine. (pg. 477)
The intelligent investor should recognize that market panics can create great prices for good companies and good prices for great companies. (pg. 483)
The secret of sound investment into three words: MARGIN OF SAFETY. (pg. 512)
The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price. (pg. 517)
There is a close logical connection between the concept of a safety margin and the principle of diversification. (pg. 518)
Diversification is an established tenet of conservative investment. (pg. 518)
It is our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity — provided that the buyer is informed and experienced and he practices adequate diversification. For, if the price is low enough to create a substantial margin of safety, the security thereby meets our criterion of investment. (pg. 521)
Investment is most intelligent when it is most businesslike. (pg. 523)
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. (pg. 526)
By refusing to pay too much for an investment, you minimize the chances that your wealth will ever disappear or suddenly be destroyed. (pg. 527)
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. (pg. 529)
Successful investing is about managing risk, not avoiding it. (pg. 535)
At heart, “uncertainty” and “investing” are synonyms. (pg. 535)
Without a saving faith in the future, no one would ever invest at all. To be an investor, you must be a believer in a better tomorrow. (pg. 535)