The Intelligent Investor

by Benjamin Graham

Santayana: “Those who do not remember the past are condemned to repeat it.”

bond yields over stock yields

(“The fault, dear investor, is not in our stars—and not in our stocks—but in ourselves….”)

The virtues of a simple portfolio policy have been emphasized—the purchase of high-grade bonds plus a diversified list of leading common stocks—which any investor can carry out with a little expert assistance.

margin-of-safety principle,

If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them. —Henry David Thoreau, Walden

We recommended that the investor divide his holdings between high-grade bonds and leading common stocks; that the proportion held in bonds be never less than 25% or more than 75%, with the converse being necessarily true for the common-stock component; that his simplest choice would be to maintain a 50–50 proportion between the two, with adjustments to restore the equality when market developments had disturbed it by as much as, say, 5%. As an alternative policy he might choose to reduce his common-stock component to 25% “if he felt the market was dangerously high,” and conversely to advance it toward the maximum of 75% “if he felt that a decline in stock prices was making them increasingly attractive.”