Buy stocks as if you were buying the entire business. That has been a cornerstone of Warren Buffett’s investment philosophy for more than fifty years. Sure, he’s traded stocks and engaged in arbitrage. Still, his largest long-term gains have come from owning wonderful businesses, regardless of whether or not the stock market told him so.
I recently revisited The Intelligent Investor
The true investor scarcely ever has to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.
Graham Translated
The prices in your stocks will swing up and down based on the actions of others. When more people are buying than selling, your stock will go up. When more are selling than buying, your stock price will drop. The activity is based entirely on the perceptions and judgments of other investors and traders.
Remember what Buffett said:
A public-opinion poll is no substitute for thought.
and
Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
Don’t let traders and gamblers influence your decisions. Instead, make your decisions, then let the traders and gamblers fight to see who will sell you the most value for the cheapest price.
Then, go have some fun doing things you really enjoy.
Filed under: How to Think About Stock Prices
Hi BP,
I think the 1973 version is the most comprehensive – and of course, Buffett’s collaboration makes it gold. The 340 pages of technical writing may be too much for many readers which is why I link to the original, 250-page work from 1949.
In my opinion, Zweig’s 640-page work helps bring the ideas up to speed, but at the expense of getting away from Buffett and Graham’s raw teachings and injecting a bit too much contemporary thinking.
The principals of business growth and value investing are timeless. I would recommend that readers new to The Intelligent Investor start with the 1949 version (the linked one) and then add the 1973 text for further, more detailed analyses.
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Joe,
Your site is gold! Thanks for posting, as a reminder of what investing should be, Buffett’s and Graham’s wisdom about watching the tape. After reading your post, I turned off the ticker on my PC. I’m happy with my purchases, so I don’t need to watch them all day, every day.
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Mike: Sorry, I completely missed your comment and just saw it now. Thanks so much for visiting and I hope you keep coming back!
M.E.: Welcome back to the world of investing in wonderful businesses. So long as you own wonderful companies and got them for fair or bargain prices, go do what you really enjoy. Let the managers worry about the business every day!
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The intelligent investor is one of the greatest books ever written.I love the way he says:short term the market is a voting machine but long term it is a weighing machine.I have had many so called “brokers” but then I realized they were doing their job making me broker!Since reading the Intelligent Investor I have changed my thinking dramatically.I no longer care about stock prices but more about the value of the companies I am buying.I understand the value of riskless cash and now have available cash when the market crashes.When the market would crash before my “broker” would tell me to sell my losers and buy winners and as always keep none of my money in CASH because the market always goes up long term.Graham states there is no guarantee that the market short term will outperform riskless cash.I no longer follow the market mania day to day.The cash I have insulates me from the hysteria.IF I had all my money in the market I would surely panic and be a “speculator and not an “investor”CASH IS KING!!!
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Joe,
I appreciate your openess.
If I didn’t already have The Intelligent Investor, I would buy it via your link so that you would get something for all you are contributing here.
The first evening I found your site I spent several hours going over everything and your spread sheets. I learned more in that evening about investing than any book I ever read.
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