How We Invest Your Money

The Investment Process

This passage from Benjamin Graham’s textbook, "Security Analysis," describes the "typical" Joseph Barry Co. client and the way we view our role.
"We believe the defensive investor should divide his funds into two parts. The first part should be placed in United States government bonds or in the tax-free issues of state and municipal bodies. The second part should be placed in a diversified list of leading common stocks, purchased at a reasonable price level. The relative proportions of the two parts will depend largely on the subjective feeling of the investor-but it should normally fall between a 75 to 25 percent and 25 to 75 percent division.

"The defensive investor may properly do his common-stock purchasing through the medium of investment-fund shares. This policy would appear especially sensible for the small investor, but it would not be illogical for the investor with substantial means as well.

"The chief requirement for all defensive investors is that they exercise firmness in the application of the simple principles of sound procedure outlined above. The main hazards they face are of three kinds, viz., being tempted into (1) stock-market speculation, (2) buying second-rate issues, (3) buying good common stocks at excessive prices. It is the duty of conscientious security analysts to assist defensive investors to escape these pitfalls by clinging tenaciously to the unexciting but safe path of standard, conservative investment."

Graham, Benjamin; Dodd, David; and Cottle, Sidney. "Security Analysis," Fourth Edition. New York: McGraw Hill, 1962. Reprinted with permission.