The Intelligent Investor

by Benjamin Graham

In 1999, Money Magazine asked more than 500 people whether their portfolios had beaten the market. One in four said yes. When asked to specify their returns, however, 80% of those investors reported gains lower than the market’s. (Four percent had no idea how much their portfolios rose—but were sure they had beaten the market anyway!) A Swedish study asked drivers who had been in severe car crashes to rate their own skills behind the wheel. These people—including some the police had found responsible for the accidents and others who had been so badly injured that they answered the survey from their hospital beds—insisted they were better-than-average drivers. In a poll taken in late 2000, Time and CNN asked more than 1,000 likely voters whether they thought they were in the top 1% of the population by income. Nineteen percent placed themselves among the richest 1% of Americans. In late 1997, a survey of 750 investors found that 74% believed their mutual-fund holdings would “consistently beat the Standard & Poor’s 500 each year”—even though most funds fail to beat the S & P 500 in the long run and many fail to beat it in any year.1 While this kind of optimism is a normal sign of a healthy psyche, that doesn’t make it good investment policy. It makes