101 Quotes from The Intelligent Investor by Benjamin Graham

The Intelligent Investor by Benjamin Graham is one of the most popular investing books in history.

It’s helped millions learn to become a better investor, and break down old stereotypes to build wealth through assets, not cash.

Warren Buffett said it is “by far the best book on investing ever written.”

Here are 101 of my favourite quotes from The Intelligent Investor by Benjamin Graham.

1. Intelligence has nothing to do with IQ or SAT scores. It means being patient, disciplined, and eager to learn.

2. Buy cheap and sell dear.

3. Hold an index fund for 20 years or more, adding new money every month, and you’re certain to outperform the majority of investors.

4. The higher the price you pay, the lower your return will be.

5. The intelligent investor is a realist who sells to optimists, and buys from pessimists.

6. The art of successful investing lies in choosing industries that are most likely to grow in the future, and then in identifying the most promising companies in these industries.

7. Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocket.

8. The worst losses always occur after the buyer forgot to ask ‘How much’?

9. The future value of every investment is a function of its present price.

10. The only indisputable truth the past teaches us is that the future will always surprise us.

11. Those who don’t remember the past are condemned to repeat it.

12. Most of the time, the market is accurate in pricing stocks.

13. Some speculation is necessary and unavoidable, for in many situations there are possibilities of both profit and loss, and the risks therein must be assumed by someone.

14. Never buy a stock without reading the footnotes to the financial statements in the annual report.

15. While enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it leads to disaster.

16. Your chances of selecting the top funds of the future on the basis of their past returns are about as high as the odds that Bigfoot will show up in pink ballet slippers at your next cocktail party.

17. The true investor scarcely ever is forced to sell their shares, and at all other times they’re free to disregard the current prices.

18. While it seems easy to foresee which industry will grow the fastest, that foresight has no real value if most other investors are already expecting the same thing.

19. You must thoroughly analyse a company, and the soundness of its underlying businesses, before you buy its stock.

20. To achieve satisfactory investment results is easier than most people realise; to achieve superior results is harder than it looks.

21. With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles, but we cling tenaciously and unquestioningly to our prejudices.

22. The fault, dear investor, is not in our stars or our stocks, but in ourselves.

23. Invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.

24. Staying humble about your forecasting powers, will keep you from risking too much on a view of the future that may well turn out to be wrong.

25. The investment world nevertheless has enough liars, cheaters, and thieves to keep Satan’s check-in clerks frantically busy for decades to come.

26. A fund can offer excellent value even if it doesn’t beat the market. By providing a way to diversify your holdings and by freeing up your time for all the other things you’d rather be doing than picking your own stocks.

27. You must deliberately protect yourself against serious losses. You must aspire to have “adequate,” not extraordinary, performance.

28. As a friend said, to a man with a hammer, everything looks like a nail.

29. 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.

30. The prices of common stocks are not carefully thought out computations, but the resultants of a welter of human reactions.

31. An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.

32. No borrowing to buy or hold securities.

33. There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent.

34. When a fund earns high returns, investors notice, often pouring in hundreds of millions of dollars in a matter of weeks. That leaves the fund manager with few choices, all of them bad.

35. The intelligent investor dreads a bull market, since it makes stocks more costly to buy.

36. Can you imagine buying an entire business simply because the price of the business had been marked up substantially last week and the week before?

37. 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.

38. The only thing you can be confident of while forecasting future stock returns is that you’ll probably turn out to be wrong.

39. The intelligent investor realises that stocks become more risky as their prices rise, and less risky as their prices fall.

40. The readers are to buy their stocks as they bought their groceries, not as they bought their perfume.

41. Plant trees that other men will sit under.

42. The manic-depressive Mr. Market doesn’t 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. When they’re going down, he’s desperate to dump them for less than their true worth.

43. Since the profits that companies can earn are finite, the price that investors should be willing to pay for stocks must also be finite.

44. Watch for disclosures about debt, stock options, loans to customers, reserves against losses, and other “risk factors” that can take a big chomp out of earnings.

45. People who invest make money for themselves. People who speculate make money for their brokers.

46. Everybody knows that most people who trade in the market lose money at it in the end.

47. The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.

48. Security analysis cannot presume to lay down general rules as to the “proper value” of any given common stock…

49. Investing is a unique kind of casino. One where you can’t lose in the end, so long as you play only by the rules that put the odds squarely in your favour.

50. Groundbreaking new research in neuroscience shows that our brains are designed to perceive trends even where they might not exist.

51. An elementary requirement for the intelligent investor is an ability to resist the blandishments of salesmen offering new common-stock issues during bull markets.

52. Never mingle your speculative and investment operations in the same account, nor in any part of your thinking.

53. All things excellent are as difficult as they are rare.

54. The average doctor may be more likely than the average widow to elect to become an enterprising investor, and he is perhaps more likely to succeed in the undertaking. He has one important handicap, however: The fact that he has less time available to give to his investment education and to the administration of his funds.

55. I always find it extraordinary that so many studies are made of price and volume behaviour, the stuff of chartists.

56. 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.

57. A stock is not just a ticker symbol or an electronic blip. It’s an ownership interest in an actual business, with an underlying value that does not depend on its share price.

58. I have little confidence even in the ability of analysts, let alone untrained investors, to select common stocks that will give better than average results.

59. The true investor scarcely ever is forced to sell their shares, and at all other times they’re free to disregard the current price quotation. They need pay attention to it and act upon it only to the extent that it suits their book, and no more.

60. The stock market’s performance depends on three factors: real growth, inflationary growth, and speculative growth.

61. Blessed is he who expecteth nothing, for he shall not be disappointed. Blessed is he who expecteth nothing, for he shall enjoy everything.

62. Once a fund becomes successful, its managers tend to become timid and imitative. As a fund grows, its fees become more lucrative, making its managers reluctant to rock the boat. The very risks that the managers took to generate their initial high returns could now drive investors away.

63. Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.

64. These people proved Graham’s assertion that “the investor’s chief problem, and even his worst enemy, is likely to be himself.

65. The intelligent investor should conclude that IPO doesn’t stand only for “initial public offering.” It’s also shorthand for: It’s Probably Overpriced, Imaginary Profits Only, Insiders’ Private Opportunity, or Idiotic, Preposterous, and Outrageous.

66. The real money in investment will have to be made not out of buying and selling, but of owning and holding securities, receiving interest and dividends and increases in value.

67. The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements.

68. Read backwards. When you research a company’s financial reports, start reading on the last page and slowly work your way toward the front.

69. 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 behavioural discipline that are likely to get you where you want to go.

70. 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.

71. Graham praised index funds as the best choice for individual investors, as does Warren Buffett.

72. Financial scholars have been studying mutual-fund performance for at least a half century, and they’re virtually unanimous on several points. 1. The average fund does not pick stocks well enough to overcome its costs of researching and trading them. 2. The higher a fund’s expenses, the lower its returns. 3. The more frequently a fund trades its stocks, the less it tends to earn. 4. Highly volatile funds, which bounce up and down more than average, are likely to stay volatile. 5. Funds with high past returns are unlikely to remain winners for long.

73. Buffett insists on steady and sustainable growth in earnings, so the company will be worth more in the future than it is today.

74. The heart of Graham’s argument is that the intelligent investor must never forecast the future exclusively by extrapolating the past.

75. A recent article in the Financial Analysts Journal confirmed what other studies have shown: that the fastest-growing companies tend to overheat and flame out.

76. 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.

77. The punches you miss are the ones that wear you out.

78. Today’s investors have forgotten Graham’s message. They put most of their effort into buying a stock, a little into selling it, and none into owning it.

79. In the end, what matters isn’t crossing the finish line before anybody else but just making sure that you do cross it.

80. If you want to put money in investment funds, buy a group of closed-end shares at a discount of, say, 10% from asset value, instead of paying a premium of about 9% above asset value for shares of an open-end company.

81. Obvious prospects for physical growth in a business don’t translate into obvious profits for investors.

82. Fidelity and Vanguard offer mutual funds with annual expenses comfortably under 1%, while several closed-end funds are also available at a reasonable cost.

83. There is no room in this philosophy for a middle ground, or a series of gradations, between the passive and aggressive status.

84. Graham reminds us, “there is just as much reason to exercise care and judgment in being as in becoming a stockholder.”

85. Some investors would be better off if their stocks had no market quotation at all, for they would then be spared the mental anguish caused by other peoples’ mistakes of judgment.

86. Through chances various, through all vicissitudes, we make our way.

87. Investors were delighted to earn 11% on bank 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.

88. Usually labeled “summary of significant accounting policies,” one key note describes how the company recognises revenue, records inventories, treats instalment or contract sales, expenses its marketing costs, and accounts for the other major aspects of its business.

89. It is far from certain that the typical investor should regularly hold off buying until low market levels appear, because this may involve a long wait, very likely the loss of income, and the possible missing of investment opportunities.

90. Diversification is impractical unless you have well over $100,000 to invest.

91. Buffett likes to snap up a stock when a scandal, big loss, or other bad news passes over it like a storm cloud.

92. It’s expensive to trade small lots of convertible bonds.

93. If the reason people invest is to make money, then in seeking advice they are asking others to tell them how to make money. That idea has some element of naïveté.

94. Millions of buyers and sellers haggling over price do a remarkably good job of valuing companies, on average. But sometimes, the price is not right; occasionally, it is very wrong indeed.

95. You will be much more in control, if you realise how much you are not in control.

96. The more you know going in, the less likely you are to probe a stock for weaknesses.

97. The market is a pendulum that forever swings between unsustainable optimism and unjustified pessimism.

98. 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.

99. Many skeptics are inclined to dismiss the whole procedure of chart reading as akin to astrology or necromancy. But, its importance in Wall Street requires that its pretensions be examined with some degree of care.

100. 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.

101. I feel grateful to the Milesian wench who, seeing Thales spending his time in contemplation of the heavenly vault and always keeping his eyes raised upward, put something in his way to make him stumble, to warn him that it’s time to amuse his thoughts with things in the clouds when he had seen to those at his feet. Indeed she gave them good counsel, to look rather to himself than to the sky.

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