Individuals who cannot master their emotions are ill-suited to profit from the investment process.
Benjamin GrahamRead
Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of good business conditions. The purchasers view the good current earnings as equivalent to 'earning power' and assume that prosperity is equivalent to safety.
Interpretation
What this quote means
Investors often lose money by buying low-quality stocks during prosperous times, mistaking current earnings for future stability.
Benjamin Graham emphasizes the common pitfall of investors who, in periods of economic prosperity, mistakenly equate strong current earnings with long-term investment safety. This false sense of security can lead them to purchase low-quality securities, which ultimately results in significant financial losses when market conditions change.
Themes
InvestmentSecuritiesLossEarningsRiskProsperity
In practice
Example use cases
In a financial seminar discussing investment strategies, one might use this quote to caution attendees about the risks of investing during economic booms.
More from Benjamin Graham
All quotes →It is absurd to think that the general public can ever make money out of market forecasts.
Benjamin GrahamRead
Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it – even though others may hesitate or differ.
Benjamin GrahamRead
Obvious prospects for physical growth in a business do not translate into obvious profits for investors.
Benjamin GrahamRead
When somebody asserts that a stock has an earning power of so much, I am sure that the person who hears him doesn't know what he means, and there is a good chance that the man who uses it doesn't know what it means.
Benjamin GrahamRead
To be an investor you must be a believer in a better tomorrow.
Benjamin GrahamRead
Similar quotes
You're looking for a mispriced gamble. That's what investing is. And you have to know enough to know whether the gamble is mispriced. That's value investing.
Charlie MungerRead
If you are predisposed to be patient, disciplined and psychologically appreciate the idea of buying bargains, then you're likely to be good at it. If you have a need for action, if you want to be involved in the new and exciting technological breakthroughs of our time, that's great, but you're not a value investor, and you shouldn't be one.
Seth KlarmanRead
Investing is a virtuous habit best started as early as possible.
John C. BogleRead
Everybody thinks that they're going to time the market, they're going to sharpshoot the market, and buy right at the bottom. The truth of the matter is that nobody is good at it.
Barbara CorcoranRead
When an investor focuses on short-term investments, he or she is observing the variability of the portfolio, not the returns - in short, being fooled by randomness.
Nassim Nicholas TalebRead
Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes.
John C. BogleRead