December 15, 2023

The best way to measure your investing success – Benjamin Graham

Benjamin Graham, often considered the father of value investing, was a prominent economist and investor known for his pragmatic and disciplined approach to investing. The quote you mentioned reflects his philosophy on measuring success in investing.

Graham's point is that the primary goal of investing should not necessarily be to outperform the market consistently. Instead, success in investing should be measured by two other key factors:

  1. Financial Plan: Graham emphasizes the importance of having a well-thought-out financial plan. This plan includes setting clear financial goals, understanding your risk tolerance, determining your investment time horizon, and establishing a diversified portfolio that aligns with your objectives. Success, in this context, means that you have a strategy in place to achieve your financial goals.
  2. Behavioral Discipline: Graham also stresses the significance of behavioral discipline in investing. This refers to the ability to stick to your financial plan and investment strategy despite market fluctuations and emotions like fear and greed. Success, in this aspect, means that you can maintain discipline and avoid making impulsive or emotionally driven investment decisions.

Graham's point is that the true measure of success in investing isn't just about beating the market's returns on a short-term basis. Instead, it's about whether you have a well-defined plan and the discipline to stick to it over the long term. By focusing on these aspects, you are more likely to achieve your financial objectives and secure your financial future, which, in the end, is the ultimate goal of investing, according to Graham's philosophy. This perspective encourages a patient and rational approach to investing, which can lead to more sustainable and predictable outcomes.

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