P. 310

Security Analysis, 1934 ed., p. 310.

As Graham advised in an interview, “Ask yourself: If there was no market for these shares, would I be willing to have an investment in this company on these terms?” (Forbes, January 1, 1972, p. 90.)period, no matter how dangerous or dumb their tactics, people boasted that they were “right.” But the intelligent investor has no interest in being temporarily right. To reach your long term financial goals, you must be sustainably and reliably right. The techniques that became so trendy in the 1990s-day trading, ignoring diversification, flipping hot mutual funds, following stock picking “systems”-seemed to work. But they had no chance of prevailing in the long run, because they failed to meet all three of Graham’s criteria for investing.

To see why temporarily high returns don’t prove anything, imagine that two places are 130 miles apart. If I observe the 65 mph speed limit, I can drive that distance in two hours. But if I drive 130 mph, I can get there in one hour. If I try this and survive, am I “right”? Should you be tempted to try it, too, because you hear me bragging that it “worked”? Flashy gimmicks for beating the market are much the same: In short streaks, so long as your luck holds out, they work. Over time, they will get you killed.