We are at a stock market turning turning-point, where, led by America, we could enter bear country. I turned to Benjamin Graham’s reflections on investor psychology which tends to push for error.
In chapter 4 of the Intelligent Investor he says that “according to tradition the sound reason for increasing the percentage in common stocks would be the appearance of the “bargain price” levels created in a protracted bear market. Conversely, sound procedure would call for reducing the common-stock component below 50% when in the judgement of the investor the market level has become dangerously high. “The copybook maxims have always been easy to enunciate and always difficult to follow – because they go against that very human nature which produces that excesses of bull and bear markets. “It is almost a contradiction in terms to suggest a feasible policy for the average stockholder that he lighten his holdings when the market advances beyond a certain point and add them after a corresponding decline. “It is because the average man operates, and apparently must operate, in opposite fashion that we have had the great advances and collapses of the past. “Investors as a shrewd experienced group [should] sell out to the heedless, hapless speculators at high prices and buy back from them at depressed levels”. Focus on pricing shares In chapter 8 he concentrates on true investing principles. “Since common stocks...are subject to recurrent and wide fluctuations in their prices, the intelligent investor should be interested in the possibilities of profiting from these pendulum swings. “There are two possible ways by which he may try to do this: the way of timing and the way of pricing. “By timing we mean the endeavour to anticipate the action of the stock market – to buy or hold when the future course is deemed to be upward, to sell or refrain from buying when the course is downward. “By pricing we mean the endeavo
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Glen ArnoldI'm a full-time investor running my portfolio. I invest other people's money into the same shares I hold under the Managed Portfolio Service at Henry Spain. Each of my client's individual accounts is invested in roughly the same proportions as my "Model Portfolio" for which we charge 1.2% + VAT per year. If you would like to join us contact Jackie.Tran@henryspain.co.uk investing is about making the right decisions, not many decisions.
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