Graham’s Three Principles
Posted in Investment, Quote on Dec 3rd, 2008
* A stock is the right to own a little piece of business. A stock is worth a certain fraction of what you would be willing to pay for the whole business.
* Use a margin of safety. Investing is built on estimates and uncertainty. A wide margin ensures that the effects of good decisions are not wiped out by errors. The way to advance, above all, is by not retreating.
* Mr. Market is your servant, not your master. Graham postulated a moody character called Mr. Market, who offers to buy and sell stock every day, often at prices that don’t make sense. Mr. Market’s mood should not influence your view of price. However, from time to time he does offer the chance to buy low and sell high.
- p. 147, The Snowball
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