"Securities in an Insecure World" A lecture by Benjamin Graham

Delivered at Town Hall, St. Francis Hotel, November 15, 1963

The following quotes are from Benjamin Graham, renowned in financial circles as Warren Buffett’s teacher and considered by many to be the father of value investing. The quotes are from decades ago but worthwhile, as they shed light on and emphasize the fact that nothing under the sun is new when it comes to investing basics, and a lot of investing principles are timeless. Much like today, in 1963 investors were concerned about market valuations, inflation and all the other financial topics of their day. Back then (January 1963) the Dow was at 683, while today the Dow is north of 32,000.

“I would like to point out that the last time I made a stock market prediction was in the year 1914, when my firm judged me qualified to write their daily market letter, based on the fact I had one month’s experience on Wall Street. Since then I have given up on making predictions.”  The takeaway here is that the world’s greatest investors are disciplined and process oriented. Whether a value investor like Warren Buffett or a hedge fund manager with a macroeconomic bent like Ray Dalio, their success is attributable to the process that they refine and employ as opposed to making predictions as to which direction the market will go in the short term.

“Now let me summarize this stage. The investor needs common stocks in his portfolio; but these introduce hazards of wide fluctuations which he cannot expect to avoid more successfully than others…”  This is probably one of the most important aspects of investing in the stock market that successful investors understand almost intuitively – the stock market fluctuates and staying invested during moderate to severe downturns is a must to be successful. Timing the market has been proven time and again to be, for all intents and purposes, impossible. Furthermore, the astute investor takes advantage of market sell-offs as a buying opportunity, when great companies go on sale.

“In my nearly fifty years of experience in Wall Street I’ve found that I know less and less about what the stock market is going to do but I know more and more about what investors ought to do”.  Back in Graham’s day this was a novel concept, but behavioural finance is now an accepted and useful branch of investing. In a nutshell, you cannot control what the market is going to do, but you can control your behaviour as an investor – don’t get greedy and start speculating when markets are soaring upward, and don’t give in to fear and capitulate when markets take hefty downturns.

“The best way to measure your investment 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 need to go.”  Although from Graham, this quote isn’t from his Town Hall meeting, but it’s important as it’s a complement to the quote regarding behaviour directly above. A financial plan provides a framework and roadmap for your financial goals and, most importantly, a way to measure whether or not you’re reaching your personal financial goals over time, which can range from funding a retirement income, to building a dream cottage or leaving behind a legacy, or anything in between. Successful clients like ours follow their plan rigorously and ignore short-term noise, and update their financial plan only when major life events require it.

Randy and Ian

Image source: By Equim43 - http://mejorbroker.org/, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=48065157