Successful investing is about managing risk, not avoiding it. At first glance, when you realize that Graham put 25% of his fund into a single stock, you might think he was gambling rashly with his investors’ money. But then, when you discover that Graham had painstakingly established that he could liquidate GEICO for at least what he paid for it, it becomes clear that Graham was taking very little financial risk. But he needed enormous courage to take the psychological risk of such a big bet on so unknown a stock.1
And today’s headlines are full of fearful facts and unresolved risks: the death of the 1990s bull market, sluggish economic growth, corporate fraud, the specters of terrorism and war. “Investors don’t like ...
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