Why did Benjamin Graham oppose investing based on market predictions?

Okay, the question gets to the heart of value investing. Benjamin Graham objected to investing based on market predictions—this is almost the cornerstone of his entire investment philosophy. Let me try to explain it clearly in plain language.

Why Doesn't Graham Want Us to "Predict the Market"?

Imagine you are an expert at picking fruit. You know which watermelons are sweet, which apples are crisp, and you have a good sense of what this fruit is roughly worth.

Graham's investment philosophy is about making you a "fruit-picking expert" rather than a "fortune teller predicting fruit prices."

He opposed market prediction mainly based on these few simple yet profound reasons:

1. "Mr. Market" is an Emotionally Unstable Maniac

This is Graham's most classic analogy. He imagined the entire market as a partner called "Mr. Market."

This "Mr. Market" comes to you every day, offering a price he's willing to buy your stocks from you or sell his stocks to you.
His advantage: He never backs out. If you say buy, he buys; if you say sell, he sells.
His disadvantage: He is extremely emotionally volatile. Sometimes he's exuberant and will offer you a ridiculously high price to buy your stocks; other times he's depressed and will try to sell you his stocks at an absurdly low price.

Graham said, how should a sensible person deal with this "Mr. Market"?

The proper approach is: Use his emotions, don't be swayed by them.

When he offers a particularly low price (market panic, sharp decline), happily buy good company stocks from him.
When he offers a particularly high price (market frenzy, sharp rise), sell your stocks to him.
If he offers a price that's neither here nor there, you can simply ignore him and go about your own business.

Trying to predict the market is like guessing whether "Mr. Market" will be happy or sad tomorrow. This is not only incredibly difficult but also completely unnecessary. As an "expert," you only need to care about one thing: Is the price he's offering advantageous compared to your valuation of the company's true worth?

2. Predicting the Future is "Impossible Even for the Gods"

Graham was very pragmatic. He believed that short-term market fluctuations result from the interplay of countless factors (economics, politics, mass psychology, etc.), a complexity beyond human predictive ability.

Even experts can't do it: Look at all the "stock gods" and "analysts" on TV. If they could truly predict the market accurately, they would have gotten rich themselves long ago—why would they bother earning small appearance fees on TV? The reality is, their prediction accuracy is about as good as flipping a coin.
Ordinary people like us are even less equipped: We lack insider information and large research teams. Trying to "call tops and bottoms" is essentially gambling, and gambling with low odds at that.

Therefore, Graham argued that instead of wasting time and energy on this unreliable "fortune-telling," you should focus them where they can produce tangible results.

3. "Guessing the Market" Diverts You from Sound Investing

What's the core difference between investing and speculation?

Investing: Is based on a detailed analysis of a company's intrinsic value, aiming for the safety of principal and an adequate return. You are buying a piece of the company.
Speculation: Is based on predictions about market price movements, aiming to profit from them. You are buying price fluctuations.

Once you start obsessing over predicting the market, your focus shifts from "What is this company really worth?" to "Will the overall market rise or fall tomorrow?".

This leads to a disastrous consequence: Chasing gains and fleeing losses (buying high, selling low).

When the market rises, you fear missing out and rush to buy, often buying at a high.
When the market falls, you fear losing more and rush to sell, often selling at a low.

This directly contradicts the fundamental money-making logic of "buy low, sell high." Graham's value investing framework was designed precisely to help investors overcome this human weakness.

So, Instead of Predicting the Market, What Should We Do?

Graham provided a very clear alternative:

Adhere to the principle of "Margin of Safety": Only buy something when its price is significantly lower than your estimate of its intrinsic value. For example, after detailed analysis, if you believe a company is worth $10 per share, you wait until it falls to $5 or $6 before buying. This difference ($4 or $5) is your "cushion" – it protects you so that even if your estimate is slightly off or the market falls further, your risk of significant loss is small.
Think like a "Business Owner": Buying a stock means buying a small part of that company. So, think like an owner: Is this company profitable? Are its products competitive? Is the management competent? Are debts manageable? Don't act like a gambler glued only to the flashing red and green numbers on the screen.
Employ Rules and Discipline: Graham advised investors to use simple rules to constrain themselves, like "asset allocation." A classic example is dividing funds proportionally (say, 50/50) between stocks and bonds and periodically rebalancing. The benefit is that when the stock market surges, you automatically sell some stocks to lock in gains; when it crashes, you automatically use money from bonds to buy cheap stocks. This is a way of "buying low and selling high" that is automatic and requires no prediction.

In summary

Put simply, Graham believed that as an investor, your advantage lies in being able to assess the value of a company, not in predicting the emotions of a crowd.

Therefore, abandon that crystal ball of market prediction that no one can reliably see through. Pick up your magnifying glass (company analysis) instead. Then, when "Mr. Market" acts foolishly, calmly and systematically take advantage of him. This is the path ordinary people can tread to consistently succeed in the investment game.