by Jason Zweig
It is sometimes said that to be an intelligent
investor, you must should be unemotional. That isn't
true; instead, you should be inversely emotional.
Even after recent turbulence, the Dow Jones In-
dustrial Average is up roughly 30% since its low in
March. It is natural for you to feel happy or relieved
about that. But Benjamin Graham believed, in-
stead, that you should train yourself to feel worried
about such events.
At this moment, consulting Mr. Graham's wis-
dom is especially fitting. Sixty years ago, on May
25, 1949, the founder of financial analysis published
his book, "The Intelligent Investor," in whose honor
this column is named. And today the market seems
to be in just the kind of mood that would have wor-
ried Mr. Graham: a jittery optimism, an insecure
and almost desperate need to believe that the worst
You can't turn off your feelings, of course. But you
can, and should, turn them inside out.
Stocks have suddenly become more expensive to
accumulate. Since March, according to data from
Robert Shiller of Yale, the price/earnings ratio of
the S&P 500 index has jumped from 13.1 to 15.5.
That's the sharpest, fastest rise in almost a quarter-
century. (As Graham suggested, Prof. Shiller uses a
10-year average P/E ratio, adjusted for inflation.)
Over the course of 10 weeks, stocks have moved
from the edge of the bargain bin to the full-price
rack. So, unless you are retired and living off your
investments, you shouldn't be celebrating, you
should be worrying.
Mr. Graham worked diligently to resist being
swept up in the mood swings of "Mr. Market" -- his
metaphor for the collective mind of investors, eu-
phoric when stocks go up and miserable when they
In an autobiographical sketch, Mr. Graham wrote
that he "embraced stoicism as a gospel sent to him
from heaven." Among the main components of his
"Internal equipments," he also said, where a "certain
aloofness" and "unruffled serenity."
Mr. Graham's last wife described him as "humane,
but not human." I asked his son, Benjamin Graham Jr.,
what that meant. "His mind was
elsewhere, and he did have a little difficulty in relat-
ing to others," "Buz" Graham said of this father. "He
was always internally multitasking. Maybe people
who go into investing are especially well-suited for it
if they have that distance or detachment."
Mr. Graham's immersion in literature, math-
ematics and philosophy, he once remarked, helped
him view the markets "from the standpoint of eter-
nity, rather than day-to-day."
Perhaps as a result, he almost invariably read the
enthusiasm of others as a yellow caution light, and
he took their misery as a sign of hope.
His knack for inverting emotions helped him see
when markets had run to extremes. In later 1945, as
the markets was rising 36%, he warned investors to
cut back on stocks; the next year, the market fell 8%.
As stocks took off in 1958-59, Mr. Graham was again
pessimistic; years of jagged returns followed. In late
1971, he counseled caution, just before the worst
bear market in decades hit.
In the depths of that crash, near the end of
1974, Mr. Graham gave a speech in which he cor-
rectly forecast a period of "many years" in which
"stock prices may languish."
Then he startled his listeners by pointing out this
was good news, not bad: "The true investor would
be pleased, rather than discouraged, at the prospect
of investing his new savings on very satisfactory
terms." Mr. Graham added a more startling note:
Investors would be "enviably fortunate" to benefit
from the "advantages" of a long bear market.
Today, it has become trendy to declare that "buy
and hold is dead." Some critics regard dollar-cost
averaging, or automatically investing a fixed amount
every month, as foolish.
Asked if dollar-cost averaging could ensure long-
term success, Mr. Graham wrote in 1962: "Such a
policy will pay off ultimately, regardless of when it is
begun, provided that it is adhered to conscientiously
and courageously under all intervening conditions."
For that to be true, however, the dollar-cost aver-
aging investor must "be a different sort of person
from the rest of us... not subject to the alternations
of exhilaration and deep gloom that have accompa-
nied the gyrations of the stock market for genera-
"This," Mr. Graham concluded, "I greatly doubt."
He didn't mean that no one can resist being
swept up in the gyrating emotions of the crowd. He
meant that few people can. To be an intelligent in-
vestor, you must cultivate what Mr. Graham called
"firmness of character" -- the ability to keep your
own emotional counsel.
Above all, that means resisting the contagion of
Mr. Market's enthusiasm when stocks are suddenly
no longer cheap.
intelligent adj.有才智的, 聰明的
relieve vt.緩和, 減輕
insecure adj.不安全的, 有危險的
desperate adj.情急拼命的, 挺而走險的
bargain n.協議, 買賣, 交易
sweep, swept, swept vt.清掃
resist vt.抵抗, 忍耐
miserable adj.痛苦的, 不幸的
sketch n.速寫, 素描
gospel n.準則, 真理
aloofness n.冷漠, 高傲
unruffled adj.不受騷擾的, 鎮定的
serenity n.晴朗, 風和日麗
humane adj.有人情味的, 人文的
detachment n.分離, 分開
immersion n.沉浸, 浸沒
standpoint n.立場, 觀點, 看法
eternity n.永遠, 不朽
invariably adv.不變地, 總是
enthusiasm n.熱心, 熱忱
misery n.痛苦, 不幸
jagged adj.有尖突的, 有缺口的
counsel n.商議, 忠告
courage n.勇氣, 膽量
courageous adj.英勇的, 勇敢的
discouraged adj.灰心的, 沮喪的
prospect n.指望, 預期
regard n.注重, 考慮, 關心
regardless adj.不注意的, 不留心的
adhere adv.遵守, 堅持
gloom n.黑暗, 憂鬱的心情
conclude vt.推斷出, 斷定
cultivate vt.耕種, 栽培
contagion n.接觸傳染, 感染