The Intelligent Investor: The Definitive Book On Value part 6. The purpose of this book is to supply, in a form suitable for laymen, guidance in the adoption and execution of an investment policy. Comparatively little will be said here about the technique of analyzing securities; attention will be paid chiefly to investment principles and investors’ attitudes. We shall, however, provide a number of condensed comparisons of specific securities - chiefly in pairs appearing side by side in the New York Stock Exchange list in order to bring home in concrete fashion the important elements involved in specific choices of common stocks | 36 Commentary on Chapter 1 An investor calculates what a stock is worth based on the value of its businesses. A speculator gambles that a stock will go up in price because somebody else will pay even more for it. As Graham once put it investors judge the market price by established standards of value while speculators base their standards of value upon the market price 2 For a speculator the incessant stream of stock quotes is like oxygen cut it off and he dies. For an investor what Graham called quotational values matter much less. Graham urges you to invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share Like casino gambling or betting on the horses speculating in the market can be exciting or even rewarding if you happen to get lucky . But it s the worst imaginable way to build your wealth. That s because Wall Street like Las Vegas or the racetrack has calibrated the odds so that the house always prevails in the end against everyone who tries to beat the house at its own speculative game. On the other hand investing is a unique kind of casino-one where you cannot lose in the end so long as you play only by the rules that put the odds squarely in your favor. People who invest make money for themselves people who speculate make money for their brokers. And that in turn is why Wall Street perennially downplays the durable virtues of investing and hypes the gaudy appeal of speculation. UNSAFE AT HIGH SPEED Confusing speculation with investment Graham warns is always a mistake. In the 1990s that confusion led to mass destruction. Almost everyone it seems ran out of patience at once and America became the Speculation Nation populated with traders who went shooting from stock to stock like grasshoppers whizzing around in an August hay field. People began believing that the test of an investment technique was simply whether it worked. If they beat the market over any 2 Security Analysis 1934 ed. p. 310. 3 As .
