Just as there are classics to be read and re-read in literature, history, philosophy, psychology, etc., there are classics that should be read and re-read in investing.
The most important, in my opinion, is Graham and Dodd’s 1934 classic, Security Analysis. I just finished re-reading it recently, and found many gems to share here:
“A moment’s thought will show that there can be no such thing as a scientific prediction of economic events under human control.”
Free will makes precise economic predictions a fool’s errand.
“There are no dependable ways of making money easily and quickly, either in Wall Street or anywhere else.”
That seminar you and 40,000 other participants paid for and sat through will make the speakers a fortune, not you.
“Investment theory should recognize that the merits of an issue reflect themselves in the market price not by any automatic response or mathematical relationship but through the minds and decisions of buyers and sellers”
Take that efficient market clods!
“Perhaps [the intelligent student] would be well advised to devote his attention to the field of undervalued securities–issues, whether bonds or stocks, which are selling well below the levels apparently justified by a careful analysis of the relevant facts.”
Value investing…careful analysis of the relevant facts…there it is.
“Analysis connotes the careful study of available facts with the attempt to draw conclusions therefrom based on established principles and sound logic.”
Principles applied logically!
“The value of analysis diminishes as the element of chance increases.”
No, Virginia, everything is not worthy of analysis.
“The analyst must pay respectful attention to the judgment of the market place and to the enterprises which it strongly favors, but he must retain an independent and critical viewpoint. Nor should he hesitate to condemn the popular and espouse the unpopular when reasons sufficiently weighty and convincing are at hand.”
Lemmings need not apply.
“Analyzing a security involves an analysis of the business.”
It’s shocking how infrequently this is the case.
“In general, the analyst should refrain from elaborate computations or adjustments which are not needed to arrive at the conclusion he is seeking.”
Occam’s razor for investing!
I could go on (and on and on and on, as my wife can tell you), but you get the idea.
It’s amazing how much wisdom can be derived from a book written 77 years ago, and how little can be found in thousands written since….
Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.