Saturday, May 12, 2012

The Intelligent Investor

I've been reading Benjamin Graham's book The Intelligent Investor and have been amazed by some of the insights that he had.

On page 204, Graham introduces something we've all heard before, the Mr. Market parable.

"Imagine that in some private business you own a small share that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly."

If you've been investing for any amount of time you have surely heard this quote or a paraphrase of it before. Don't let the short term price fluctuations influence your moves and don't get caught up in the fear or fervor that Mr. Market sometimes likes to bring about. The fear only serves a point to let foolish people get caught up in it and provide the intelligent investor a chance to get bargain prices on quality companies.

I highly recommend reading through The Intelligent Investor if you haven't already done so.  I've highlighted some of the information in the book, but there's so much more to learn.

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