Source: Qilehui.

If someone asks him to condense his sound investment philosophy into one sentence, his answer is what. Faced with this self-asked and self-answered problem, Graham wrote down the answer in capital letters: Marginal Safety (MARGINOFSAFETY).

An investment operation, after careful analysis, can promise the safety of the principal and create satisfactory returns. Any operation that does not meet these conditions is speculation.

When people disagree with you, it doesn't mean your opinion is right or wrong. Only when your data and logic are correct, you are right.

There are two principles for investment: the first principle is do not lose money, and the second principle is do not forget the first principle.

If you have had a large margin of safety for the stocks you have invested in, your investment will be safe and profitable when compared to the past performance of the stocks in the future.

Margin of safety is the essence of value investment, because it is the key indicator to distinguish between dangerous speculation and real investment. Margin of safety is the difference between the market price of a stock and its intrinsic value presented or assessed.

You will never make money if you always do what everyone else is doing.

For rational investment, mental attitude is more important than investment skills.

Everyone knows that in market transactions, most people end up losing money. Those who refuse to give up are either irrational, want to exchange money for pleasure, or have extraordinary talents. They are not investors in any case.

Ironically, when common stocks are sold at extremely attractive prices, people generally regard buying common stocks as speculation or gambling. On the other hand, when stock prices have risen to a level that is undoubtedly very dangerous based on past experience, buying stocks has become investment, and those who buy stocks have become investors.

Speculation is fascinating. If you make a profit in this game, you will be more fascinated. If you want to try your luck, it is best to set aside a certain proportion of funds for this purpose. Do not confuse speculation with investment either in terms of operation or thought.

The most practical difference between investors and speculators lies in their attitude towards stock market movements. The speculator's interest lies mainly in participating in market fluctuations and profiting from them; the investor's interest lies mainly in acquiring and holding appropriate stocks at appropriate prices.

Investment success or failure should be measured by long-term returns or long-term market price growth, rather than short-term gains.

When a real investor owns listed common stocks, he should be in this position: he can seek profits from the daily market price based on his own judgment and tendencies, or he can ignore it. He must pay attention to significant price fluctuations, otherwise his judgment will be unfounded.

Fundamentally, the only important meaning of price fluctuations for real investors is that they offer buying opportunities when prices fall sharply and selling opportunities when prices rise sharply. At other times, he will do better if he forgets the stock market and focuses on dividend income and company operations.

Investors with a good stock portfolio should anticipate fluctuations in their stock prices, but they should avoid being overly excited regardless of whether they rise or fall. He should know that he can profit from price fluctuations or ignore them. He should not buy a stock because it has risen or sell a stock because it has fallen. If he remembers such a saying, he will not make any big mistakes: "Don't buy stocks when they soar, and don't sell stocks when they crash."

From financial history, we must draw the conclusion that it is not inflation itself that makes it a powerful factor in the stock market, but the psychological tendency of investors influenced by it that makes it an internal factor in the bull market.

If investors invest mainly on the advice of others, either they must strictly limit their own and their investment advisers' actions to standard, conservative, or even unimaginable investment forms, or they must have extremely close relationships with their investment advisers or have considerable knowledge of them through other channels;

How an investor's interesting fuels can range from defense to aggression, he can receive advice only from one investment advisor in general commercial or professional relationships, the advice he receives can only increase to a certain extent his knowledge and experience, thus enabling him to form his own independent opinion, so that he can transform from a defensive investor into an aggressive investor.

Investors should be cautious with everyone, whether they are customer brokers or securities salespeople, even though they make promises of speculative income and profits.

Miracles can appear by making the right personal choice, that is, buying at the right level and selling before it inevitably falls after a significant rise. But ordinary investors cannot expect to achieve this, just as they cannot find money in trees.

The type of security to be purchased and the desired ROI is not dependent on the investor's financial strength, but rather on the financial skills associated with knowledge, experience, and temperament.

It is not wise to purchase bonds or preferred stocks that lack sufficient safety solely because of the appealing returns.

A traditional Wall Street saying goes: 'Never buy a lawsuit.' It correctly tells speculators to seek the market quickly for the stocks they hold.

If people could accurately select the best stocks, they would lose diversification. Within the limits of the four factors recommending common-stock selections for defensive investors, there is quite a bit of freedom of choice. Thinking from a negative point of view, indulging in this freedom of choice should be harmless; furthermore, it can make the results more valuable.

Smart investors can succeed in working with second-rate common stocks. He only buys in at a low price, which means that when their short-term prospects are bullish, he will almost not buy them, which regular buyers may find interesting.

Most of the theoretical returns on the stock market are not created by companies in continuous prosperity, but by companies experiencing ups and downs, and are created by buying low and selling high in stocks.

The changes in the modern stock market are a manifestation of a large amount of skills applied in a narrow field.

When people pay less attention to market changes, they often make a profit, which is contrary to their general knowledge. Investors must focus on the relationship between price levels and potential or core value, not on what is happening or will happen in the market.

Many now declining businesses will revive and many now glorious businesses will decline.

Dividing the world's economic management into high efficiency and low efficiency seems simple and naive. First, we lack recognition of the importance of management efficiency in affecting investment direction;

Second, it is impossible to determine the high or low efficiency of management in a rational testing way, and what people say and believe is the observation and inference of the success of the company;

Third, we are not interested in using an objective way to improve or replace inefficient management. Listening to the original and straightforward American business management proverb: 'If you are not interested in management, sell the stock!'

Efficient stock companies constantly modernize their equipment, products, accounting, management training programs, and employee relationships, and they attach great importance to modernizing their main finances, especially distribution policy.

Investment is most rational when operations are most logical, although people are surprised to see many talented businessmen who attempt to speculate on Wall Street completely ignoring all well-known principles and their careers still succeed.

'Know what you're doing-know your business.' For investors, this means: don't try to get 'business income' from securities beyond normal rights and dividend income, unless you understand the value of securities as well as you understand the value of the business you plan to make or operate.

'Don't let anyone else run your business unless you can understand and control his actions very carefully, or you can trust his loyalty and ability unreservedly.' For investors, this principle determines under what conditions they will allow others to use their money to do something.

'Don't take on an operation, ie manufacturing or trading an item, unless reliable calculations indicate that it is likely to produce fairly good returns. In particular, stay away from adventures that have little return and great loss.'

For ambitious investors, this means that their operations for obtaining returns should not be based on confidence but on arithmetic. For each investor, it means that when he restricts the return to a small number, such as that obtained from ordinary bonds or preferred stocks, he must be sure that he does not take risks with the principal.

'Use your knowledge, experience, and courage. If you have drawn a conclusion from the facts and you know that your judgment is correct, act according to it, even if others may have doubts or different opinions.'

Because of the difference between public opinion and your own views, you are neither right nor wrong; because your data and reasoning are correct, you are right. Similarly, in the securities world, courage becomes very important after appropriate knowledge and verified judgment.

Intrinsic value is the premise of value investing.

In the short term, the stock market is a "voting machine," and in the long term, it is a "weighing machine."

In the short term, the market loves beauty and in the long term, it loves to weigh itself.

Buying stocks is buying a part of a business; the market always swings between excessive excitement and excessive pessimism. Wise investors buy from overly pessimistic people and sell to overly excited people; your own performance can affect investment returns more than the performance of the securities themselves.

Pay close attention to stock prices, shop like a supermarket, not like buying cosmetics; the real heavy losses always occur when investors forget to ask "how much"; high growth does not equal high profits. Rising stocks increase risk rather than reduce it, and falling stocks reduce risk rather than increase it.

Buy stocks of companies whose stock prices are close to net asset value, which should also have appropriate PE and strong finances. This can save you from worrying about stock price fluctuations. The number of these companies is greater than you think, look at utilities.

If the company's intrinsic value remains unchanged and the fundamentals remain unchanged, then investors should consider themselves as partial owners of a valuable company.

Stock price fluctuations are market offers for trading advice. If the offer is good, use it; if the offer is bad, ignore it.

Let the market serve you, not dominate you.

Don't take a single year's profit of a listed company seriously. Calculating the five-year average profit is more meaningful.

The highest realm of investment is to operate it as a career.

If investors are willing to prepay a high price for the company's future profits, then when everything goes as planned, they will not profit; once something goes wrong, they will pay a heavy price.

Any stock with a PE ratio of more than 40 times is risky, no matter how high its growth is!

A successful investor does not need a high IQ or rich business knowledge. What they need is a calm mind that does not use emotions and reasonable prices to buy good stocks.

Overemphasizing stock price trends may lead to overvaluation or undervaluation.

Mistakes caused by the stock market will eventually be corrected by the market itself, and the market cannot ignore obvious mistakes for a long time.

Even smart investors may need strong willpower to stay out of the "herd."

Editor/Lambor