Benjamin Graham on Fixed Income

I came across an interesting article on "fixed income value investing". A larger part of this text has been taken from Benjamin Graham's popular books - Security Analysis and The Intelligent Investor. The article can be downloaded here. (pdf, 56 Kb)

Two paragraphs I particularly liked :

1. "It's our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity - provided that the buyer is informed and experienced, and that he practices adequate diversification."

2. On the topic of diversification, Graham makes an interesting connection between investing and insurance. He notes that any individual security purchase may not prove profitable, even if the margin of safety is present at the time of purchase.

Graham says, "The margin guarantees only, that he has a better chance for profit than for loss - and not that loss is impossible. But as the number of such commitments is increased the more certain does it become that the aggregate of the profits will exceed the aggregate of the losses. That is the simple basis of the insurance under-writing business."