Crashes and the rules they brought · 1929–1950s
1934
Security Analysis
Benjamin Graham and David Dodd teach investors to compare price with earnings.
Security Analysis (1934) taught investors to judge a stock by its earnings, assets and price, rather than by tips and momentum. Comparing a price with earnings per share became a standard yardstick.
💡 Why it made sense then
After the crash, investors wanted a disciplined way to tell a bargain from a bubble.
Ideas it gave us
- 📈 P/E ratio (price-to-earnings)
The price-to-earnings ratio is a stock's price divided by its earnings per share, showing how much investors pay for each dollar of profit.
Practise with $10,000 in play money
Free. No real money involved.