Jason Zweig recently posted (hat tip to The Stingy Investor for the link) the original typewritten text of a speech delivered by Benjamin Graham at San Francisco in 1963. It is nearly 50 years since that speech was delivered but it amazing how contemporary it sounds even today (though investors were worried about real, not financial, weapons of mass destruction back then). It is a reminder that, despite what you might hear in some circles, stock market uncertainty and investor insecurity isn’t something new and the principles of intelligent investing still remain the same. In the speech, Graham outlines how to estimate value in the stock market, how to create an investment policy, offers a simple prescription for stock selection and talks about some strategies for getting better than average returns.
The investor must recognize that there are uncertain and hence speculative elements inherent in any policy he follows — even an all-Government-bond program. He must deal with these uncertainties by a policy of continuous compromise between bonds and common stocks, and by adequate diversification. (Exception: He may put and keep most of his funds in shares of a promising business with which he is closely connected.) He must make a strong effort to have more money invested in common stocks at lower market levels (at least on the basis of cost) than at what he recognizes to be potentially high levels. Most important, he must maintain a philosophical attitude towards the inescapable variations in his financial position and the inevitable “mistakes” associated with these variations.