Security Analysis by Benjamin Graham and David Dodd was first published in 1934. It is a fundamental book for serious students of value investing.
In this chapter, Mr. Graham and Mr. Dodd delve into defining Investment.They analyze the common definitions of investment that are floating among the general public. However, from an analyst's perspective, investment has a specific meaning which takes both the risk and returns into consideration. Thus, the authors propose a new definition. They are specific that an analyst runs an investment operation that involves buying securities after careful analysis which results in decent returns and no loss of principal. Both price and quality of issue should be considered in that regard.
In the second half of the chapter, the authors critically differentiate between Investment and Speculation. They provide examples to demonstrate that price is an important element of investment operation. In the field of common stocks, the market prices of outstanding and known companies can have speculative components.
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