would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc.. 
Home
Why do so few private investors listen to the masters?
I'm a value investor. At least I try to be. But before you think you've heard it all before and stop reading, consider this quote from Warren Buffett:
"It baffles us how many people know of Ben Graham, but so few follow. We tell our principles freely and write about them extensively in our annual reports. They are easy to learn. They should be easy to follow. But the only thing anyone wants to know is, 'what are you buying today?' Like Graham, we are widely recognized but least followed."
What Ben Graham was talking about; the principles followed so successfully by Warren Buffet, are best explained in Graham's definitive book on value investing; 'The Intelligent Investor'. If you haven't read it yet; treat yourself to some competitively-priced wisdom. If you use it properly (and have more self-discipline than I've managed so far!) it will repay its purchase price many times over.
Also, a discussion thread earlier this year considered papers written by Ben Graham between 1930 and 1974. They make fascinating reading.
Principles abide
For value investors, Graham's advice is as relevant today as it was in the previous seven decades. The principles abide. Others would disagree.
Graham himself acknowledged factors changing, but principles remaining intact, saying:
"The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate."
Consistently winning
To beat the market consistently, you need a proven strategy or a lot of luck. After all, there's an army of highly-paid professionals out there looking at company and market prospects and factoring in next year's earnings and the one after.
But you don't have to listen to them. As Warren Buffett once said: "The investor of today does not profit from yesterday's growth."
You can take a far longer-term approach (…"Time is your friend; impulse is your enemy." – John Bogle) and an independent view; but you can also act much more quickly when you need to. Just make sure the action is based on value principles rather than impulse.
Perhaps one of the best quotes about investing comes from Spanish American philosopher George Santayana who said: "Those who cannot remember the past are condemned to fulfil it". The last two words are often misquoted to "repeat it" which then have even greater relevance for investors.
How many of us aren't guilty of repeating past mistakes when it comes to investing? A value-based strategy will help you out of this cycle.
Take this roller-coaster year as an example and consider how Ben Graham's previous pearls of wisdom may well be highly relevant in learning how to cope:
"…the chief losses to investors come from the purchase of low-quality securities at times of favourable business conditions."
"[investors] … should rarely buy them [shares] when their short-term prospects look bright."
"Individuals who cannot master their emotions are ill-suited to profit from the investment process."
And from Warren Buffett:
"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."
As for those who shun value investing as a get rich slowly / boring strategy; well, they're maybe they're right! But it beats the alternatives in investing in the stock market and has been proven to do so many times.
Ben Graham again:
"It has been an old and sound principle that those who cannot afford to take risks should be content with a relatively low return on their invested funds. From this there has developed the general notion that the rate of return which the investor should aim for is more or less proportionate to the degree of risk he is ready to run. Our view is different. The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bear on his task."
Investment not speculation
In other words, don't be tempted into speculation, concentrate instead on value investing. As Ben Graham told readers of "Mademoiselle" magazine in 1952:
"If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume."
Or as it was more drily put in the book "Security Analysis" by Graham and David Dodd from 1934:
"An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."
I'll leave the final word to the greatest practicing value investor of them all -- who seems to have the gift of summation when talking about the principles of value investing:
"it's like studying for the priesthood and finding out that the ten commandments were all that you ever needed." … Warren Buffett.
By David Holding
http://www.fool.co.uk/news/investing/2011/10/14/the-best-ever-advice-for-private-investors.aspx
I'm a value investor. At least I try to be. But before you think you've heard it all before and stop reading, consider this quote from Warren Buffett:
"It baffles us how many people know of Ben Graham, but so few follow. We tell our principles freely and write about them extensively in our annual reports. They are easy to learn. They should be easy to follow. But the only thing anyone wants to know is, 'what are you buying today?' Like Graham, we are widely recognized but least followed."
What Ben Graham was talking about; the principles followed so successfully by Warren Buffet, are best explained in Graham's definitive book on value investing; 'The Intelligent Investor'. If you haven't read it yet; treat yourself to some competitively-priced wisdom. If you use it properly (and have more self-discipline than I've managed so far!) it will repay its purchase price many times over.
Also, a discussion thread earlier this year considered papers written by Ben Graham between 1930 and 1974. They make fascinating reading.
Principles abide
For value investors, Graham's advice is as relevant today as it was in the previous seven decades. The principles abide. Others would disagree.
Graham himself acknowledged factors changing, but principles remaining intact, saying:
"The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate."
Consistently winning
To beat the market consistently, you need a proven strategy or a lot of luck. After all, there's an army of highly-paid professionals out there looking at company and market prospects and factoring in next year's earnings and the one after.
But you don't have to listen to them. As Warren Buffett once said: "The investor of today does not profit from yesterday's growth."
You can take a far longer-term approach (…"Time is your friend; impulse is your enemy." – John Bogle) and an independent view; but you can also act much more quickly when you need to. Just make sure the action is based on value principles rather than impulse.
Perhaps one of the best quotes about investing comes from Spanish American philosopher George Santayana who said: "Those who cannot remember the past are condemned to fulfil it". The last two words are often misquoted to "repeat it" which then have even greater relevance for investors.
How many of us aren't guilty of repeating past mistakes when it comes to investing? A value-based strategy will help you out of this cycle.
Take this roller-coaster year as an example and consider how Ben Graham's previous pearls of wisdom may well be highly relevant in learning how to cope:
"…the chief losses to investors come from the purchase of low-quality securities at times of favourable business conditions."
"[investors] … should rarely buy them [shares] when their short-term prospects look bright."
"Individuals who cannot master their emotions are ill-suited to profit from the investment process."
And from Warren Buffett:
"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."
As for those who shun value investing as a get rich slowly / boring strategy; well, they're maybe they're right! But it beats the alternatives in investing in the stock market and has been proven to do so many times.
Ben Graham again:
"It has been an old and sound principle that those who cannot afford to take risks should be content with a relatively low return on their invested funds. From this there has developed the general notion that the rate of return which the investor should aim for is more or less proportionate to the degree of risk he is ready to run. Our view is different. The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bear on his task."
Investment not speculation
In other words, don't be tempted into speculation, concentrate instead on value investing. As Ben Graham told readers of "Mademoiselle" magazine in 1952:
"If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume."
Or as it was more drily put in the book "Security Analysis" by Graham and David Dodd from 1934:
"An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."
I'll leave the final word to the greatest practicing value investor of them all -- who seems to have the gift of summation when talking about the principles of value investing:
"it's like studying for the priesthood and finding out that the ten commandments were all that you ever needed." … Warren Buffett.
By David Holding
http://www.fool.co.uk/news/investing/2011/10/14/the-best-ever-advice-for-private-investors.aspx
