This post will mainly be quotes (in italics) from Benjamin Graham’s book, “The Intelligent Investor.” I hope they do a great job portraying to you my overall investment philosophy.
Basics of my Investing Philosophy
1. If you speculate you will (most probably) lose your money in the end
2. Buy when most people (including experts) are pessimistic, and sell when they are actively optimistic.
3. Investigate, then invest.
The investor and stock-market fluctuations
Buying stocks means buying a worthy business and the markets ups and downs are people’s speculative emotions and do not reflect the value of owning a business.
Buying and selling stocks as if you are buying or selling a business based on current numbers and values instead of future speculations is a much better strategy.
Since I plan to be the typical investor, I shall will always be buying into the market except when prices are over a standard that I shall set.
Investing takes much more fortitude than intelligence.
As I said above.
Why my investing philosophy causes me to invest in indexes
Benjamin Graham changed his idea that cheap securities could be found as he grew older. He believed that with all the information out there in today’s more modern economy, the market price reflects the actual price of the company. This is known as the efficient market hypothesis.
I somewhat agree with the efficient market hypothesis. I still believe that people’s tendency to speculate about the future causes the market to swing in different directions. As a result, I will always in the future have a higher percentage of my invested money in stocks when people are negatively speculating and a lower percentage of my invested money in stocks when people are positively speculating.
As a result of this philosophy, there is no point in trying to pick the winners and losers of stocks.
This means that I should be happy with average market results, though I do have a couple strategies that should allow me to slightly out earn the general market.
Do you have any investing philosophies that shape the investment choices that you choose?