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Ben Graham Defines an Investment

Tuesday, November 29, 2016 0:05
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An investment operation is one which can be justified on both qualitative and quantitative grounds.

An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return.

Thorough Analysis: The study of the facts in the light of established standards of safety and value.

Safety: Protection against loss under all normal or reasonably likely conditions or variations.

Satisfactory Return: Any rate or amount of return, however low, which the investor is willing to accept, provided he acts with reasonable intelligence.

(Security Analysis, 1940)

To have a true investment there must be present a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.

(The Intelligent Investor, 1949)

Key Terms

  • Operation
  • Qualitative
  • Quantitative
  • Thorough Analysis
  • Safety of Principal
  • Satisfactory Return
  • Margin of Safety
  • Figures
  • Persuasive Reasoning
  • Body of Actual Experience

Talk to Geoff about Ben Graham’s Definition of an Investment


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