Benjamin Graham, a renowned investor and author of "The Intelligent Investor," is often considered the father of value investing. The quote "Buy not on optimism, but on arithmetic" encapsulates one of the fundamental principles of his investment philosophy.
In essence, Graham emphasizes that when making investment decisions, especially in the stock market, investors should focus on concrete financial data and analysis rather than relying solely on optimistic or speculative sentiments. Here's a breakdown of what he means:
In summary, Benjamin Graham's advice encourages investors to be rational, analytical, and disciplined in their investment approach. A sound investment strategy should be based on carefully assessing a company's financial fundamentals rather than making decisions driven solely by optimism or emotion. This approach is often associated with value investing, where investors seek to buy undervalued stocks with a margin of safety based on their financial analysis.