Benjamin Graham was against Stock Trading

Here's what the founder of Value Investing — and Warren Buffett's mentor — wrote about Technical Analysis and Stock Speculation.

Trading Is Speculative

Graham first clarifies that stock trading does not meet the definition of an investment operation; and is in fact, speculative by definition.

"We have already expressed a negative view about the investor’s overall chances of success in these areas of activity. The first we have ruled out, on both theoretical and realistic grounds, from the domain of investment. Stock trading is not an operation which, on thorough analysis, offers safety of principal and a satisfactory return."
Benjamin Graham, Chapter 1 - Investment versus Speculation: Results to Be Expected by the Intelligent Investor, The Intelligent Investor.

On Forecasting

Graham has written on numerous occasions about the unreliability of financial projections, as well as the futility of timing investments.

"We are convinced that the average investor cannot deal successfully with price movements by endeavoring to forecast them. "
Benjamin Graham, Chapter 8 - The Investor and Market Fluctuations, The Intelligent Investor.

On Technical Analysis

Then, in no uncertain terms, Graham clarifies why his ideas are not meant for those engaged in stock trading; and what his own experience and observation of the results of such activities have been. Graham's observations are nearly identical to those of John Bogle on timing.

"Since our book is not addressed to speculators, it is not meant for those who trade in the market. Most of these people are guided by charts or other largely mechanical means of determining the right moments to buy and sell. The one principle that applies to nearly all these so-called “technical approaches” is that one should buy because a stock or the market has gone up and one should sell because it has declined. This is the exact opposite of sound business sense everywhere else, and it is most unlikely that it can lead to lasting success on Wall Street. In our own stock-market experience and observation, extending over 50 years, we have not known a single person who has consistently or lastingly made money by thus “following the market.” We do not hesitate to declare that this approach is as fallacious as it is popular."
Benjamin Graham, Introduction, The Intelligent Investor.

Fundamental Difference

Graham then explains the most important difference between those who intend to invest in financial markets, and those who want to speculate in them.

"The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices."
Benjamin Graham, Chapter 8 - The Investor and Market Fluctuations, The Intelligent Investor.


A speculator buys or sells stocks in the anticipation that some future market movement will help him to make some money, by selling it higher or buying it lower. He is essentially at the mercy of luck and time to make money.


An investor has already made his profit in the first transaction. He knows he's already bought something for less than it's worth. Whether or not the market realizes this or not is irrelevant to him. He can be content holding on to this income-generating asset for the rest of his life knowing he got it at a bargain. Warrent Buffett once wrote "Our favorite holding period is forever".

"If you want to try your luck at [speculation], put aside a portion— the smaller the better—of your capital in a separate fund for this purpose... Never mingle your speculative and investment operations in the same account, nor in any part of your thinking."
Benjamin Graham, Chapter 1: Investment versus Speculation, The Intelligent Investor.

In essence, a speculator is a gambler; whereas an investor is a businessman who makes investment decisions unemotionally and objectively.

Charlie Munger

John Templeton

Sir John Templeton, creator of the world's largest international investment funds — and student of Graham — writes:

"2. Invest – don't trade or speculate. The stock market is not a casino."

"6. Buy value, not market trends or the economic outlook."

Peter Lynch

In the following 1994 video, Peter Lynch explains the importance of Earnings and Balance Sheets, and how "no one can predict the stock market".

"Everybody wants to predict the future, and I've tried to call the 1-800 psychic hotlines. It hasn't helped. The only thing I would look at is what's happening right now."