Tuesday May 24, 2022

A wise investor does not know that daily fluctuations do God

When observing a deep market fluctuation in the long run, the psychological problems associated with it are much more complicated. A substantial increase in market prices is, on the one hand, a legitimate reason for joy, but, on the other hand, an upright indicator. I may be strongly tempted to do some careless things.

Investment portfolio turnover
Every investor, only in the portfolio of bn shares, has to deal with the fact that their value will fluctuate over the years. The breeding of the DJI index since the previous book issue was written (in 1964), perhaps in the early days of what happened to the conservative investor’s equity portfolio, has only limited its equity exposure to large, prominent and conservative funded companies.

In the series of books from the book of the most important investment advisor of the 20th century, learn from the most dedicated “investment guru” how to avoid these mistakes as an investor, broker or investment advisor and how to implement long-term investment strategies.
Even with a degree in economics or finance, Benjamin Graham soon became not only a full-fledged investor and portfolio manager, but also a leading theorist. If a number of things that are written in finance, often after a few months and even weeks a little stupid, Graham’s principles published many decades ago seemed to be more likely to go a long way in the truth and truth

The total value of the index, it rose from 890 and to 995 points in 1966 (and 985 again in 1968), fell to 631 in 1970, but in 1971 it darkened to its original value and reported 940 points. (Because individual stocks have record numbers and declines at various times, the Dow Jones Group’s stock listing is much less intense than the fluctuations of their individual components.)

We examined the aggregate values ​​of several other types of diversified and conservative equity portfolios and found that the overall results were unlikely to differ materially from the two. In general, the share of the shares of the secondary companies is often much more than the price of the shares of the primary companies, but this does not necessarily mean that the group (portfolio) will be established over time, but the smaller companies should show worse results over a long period. In any case, the investor should laugh at the probability, not just the possibility, that over the five-year period, the individual shares in his portfolio may increase from their lowest value by 50% or more and decrease from their highest value by the equivalent of one-tenth of an or more .

A wise investor is very unlikely, given that daily or monthly inquiries make him godly and poor. But what about the depth kolsn in delm period? The psychological problems associated with this are then much more complicated. A substantial increase in market prices is, on the one hand, a legitimate reason for joy, but, on the other hand, an upright indicator; I may be strongly tempted to do some careless things.

The investor poses various dangers: Did the stock not grow too high? How much would I have if I bought more that time? Or is this the worst option should I succumb to the atmosphere of the market, become infected with general enthusiasm, succumb to the greed of the general public (I am one of them) and go headless shopping? Be sure to answer no to the last question. But in the real world, even in these situations, even an intelligent investor must be very serviceable so as not to succumb to the crowd.

“The Smart Investor” is by far the best book ever written about investing. It is one of the thinnest publications of its kind, but so paradoxically perhaps most ignored in practice. Such is human nature. We just want to put everything together.

Especially for these reasons, we prefer a certain mechanical method for dividing the portfolio between shares and bonds, or it provides the investor with a certain activity. When the market grows, it sometimes sells shares and invests in bonds, otherwise the reversal proceeds. These activities act as a valve for his accumulated investment of energy. In addition, if he is the right investor, he will have the added benefit of moving his steps in the opposite direction than the steps of the crowd.

Company valuation versus share valuation
The impact of market thorns can be assessed by looking at the investor as an action, hence the wall owner of the company. Owners of tradable securities have essentially two positions, with the bet that I can use any of them. On the one hand, his position is analogously placed on a minority shareholding or silent partnership in a private company.

In this case, its results depend entirely on the profitability of the company or on the change in the fundamental value of the company’s assets. He would find out the value of his share in such a company in addition to his share in a certain business name of the company, which is recorded in most balance sheets. On the other hand, an investor in ordinary shares is the holder of a piece of paper entitled shares, which can be sold in a few minutes at a price that changes from minute to minute when the market is open for trading, often far removed from the values ​​initially calculated from the values ​​in the balance sheet.

The development of the stock market over the last decade has caused the current investor to be much more dependent on the development of price quotations today, but much less free to consider himself (only) the owner of the company. The reason is the fact that the shares of the companies in which they are likely to invest, the companies are constantly at prices that are much higher than the value of the company’s assets (otherwise ethnic or balance sheet value). The fact that the investor pays these thorns pirates, becomes hostages, or just on the stock market depends on how to value his individual investment.

In the current investment, this factor is of paramount importance, but it is receiving much less attention, it would not deserve. The whole price quotation system of the action has one fundamental contradiction built into it. The better the results and prospects of the company’s taxes, the less intense will be the relationship between its market price and economic value. However, the thorn is higher than the net value, the less certain the basis for determining the intrinsic value of the stock, ie. The more this value will depend on the changing stocks and values ​​of the stock market. This brings us to the end of the paradox that society is better, the more likely it is that the price of their actions will increase.

This really means, in a very real sense, that the quality of ordinary shares is better, so speculative investments are created at least in comparison with my current shares of medium quality. (This is true for comparing the main growth companies with the mass of the time-established company; for the comparison, we issued the shares, they are called speculative, or the company that issued the shares is speculative in itself.)

The above explanation should clarify the pins of the often unpredictable breeding prices of the most successful and impressive companies in the United States. Our favorite example is the company International Business Machines. During the seven months between 1962 and 1963, the price of their shares fell from $ 607 to $ 300; after two differences, the price dropped from $ 387 to $ 219 in 1970. Similarly, Xerox, a profitable company in terms of earnings per share growth in recent years, has fallen from $ 171 to $ 87 in 1962 and 1963 and from $ 116 to $ 65 in 1970. However, these unusually large declines IBM and Xerox; spe erupted the lack of a yard in the premium (pirka above the ethnic value), which the stock market gave to the excellent search of these companies.

This discussion leads us to the top, they are of purely practical significance for a conservative investor in ordinary events. If the investor intended to pay special attention to the selected stock in the portfolio, it may be very good to choose those titles for them, they are traded at prices not deviating from their ethnic values, let’s say that the market price should not be more than one a third higher. ) value of the mass assets of pepotene per share. Purchases made for this share (or less) can logically be considered as buying shares in relation to the balance sheet, which means shares, their value is justified or supported, which is not dependent on fluctuating market prices. The premium paid above the national value can then be imagined as a fee that the investor pays for the advantage of the anchor stock on the public stock market and for the free tradability that this anchor pin.

Here, too, the bag needs caution. It would be a mistake to think that a stock is a healthy investment only because it can be sold at a price close to its national values. The investor should thus turn to the profitability of the company and demand a satisfactory value of the ratio of profit to share prices, according to a strong strong position and a satisfactory hope that the company will be able to generate sufficient profits in the coming years. Although it seems to me that we require too many modest shares, we must realize that these criteria are not difficult to meet under all market conditions, except when the market is highly dangerous. As soon as the investor is willing and ready to experience a very promising prospect, ie better than average growth, he will not take the longest possible action for him, which meets the stated conditions.

In the chapter dealing with the selection of current investments (14 and 15), we provide data showing that more than half of the shares of the DJI index met our criteria of asset value at the end of 1970. At the time when we pay these taxes, for example, AT & T is not owned by the store for the price of it, not its net asset value. According to most actions of energy and power companies, except for other benefits that mean to the investor, now, after the meeting of 1972, traded at prices, they are interesting close to their ethical values.

An investor, only owning a portfolio of shares that has participated at prices close to their national values, can afford to monitor market news much more independently and without interest than those who have paid high amounts of both earnings and certain tangible assets per share for shares. If the ability to generate profit is satisfactory, the investor can afford to pay as much attention to the stock market as he wants. In addition, from time to time I am forced to master these whims, shopping at low prices and sales at high prices.

The purpose of this revised edition of The Smart Investor is to apply Graham’s ideas to the conditions of the current financial market and still leave its original text intact (with the exception of notes under the explanatory note). Each Graham chapter is followed by a commentary. In these original shadows after the original text, there are also current examples, on which it is best to observe how current and how liberating remain Graham’s principles even today.

from the book: The Intelligent Investor

1. dl: Even a cautious investor will make time for it
2. dl: Speculation spe enrich someone else not vs
Length 3: Opposite investment tricks mean death
4. dl: You have to take speculation in the same way as casino games
5. dl: The investor and the speculator must pay attention to the forecasts of market development
6. dl: Mazan investor buys on the intermediate market and sells on bm


ryvek is from the book
“Intelligent investor”
vydan nakladatelstvm
City Publishing,
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