Real investment risk is measured not by the percent that a stock may decline in price in relation to the general market in a given period, but by the danger of a loss of quality and earnings power through economic changes or deterioration in management.

The qualitative factors upon which most stress is laid are the nature of the business and the character of the management. These elements are exceedingly important, but they are also exceedingly difficult to deal with intelligently.

It always seemed, and still seems, ridiculously simple to say that if one can acquire a diversified group of common stocks at a price less than the applicable net current assets alone - after deducting all prior claims, and counting as zero the fixed and other assets - the results should be quite satisfactory.

A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.

Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of good business conditions. The purchasers view the good current earnings as equivalent to 'earning power' and assume that prosperity is equivalent to safety.

Diversification is an established tenet of conservative investment.