Subject: Issued In Public Interest To All Blog Readers.
Today I would like to pen down a few thoughts on the irrational behaviour of Mr Market over the last week. Every day he tells us what he thinks our investments are worth and furthermore offers either to buy them out or to sell us 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 us is a little short of silly.
If you are a prudent investor or a sensible businessman, will you let Mr Market’s daily communication determine your view of the value of your portfolio’s interest in the enterprise? Only in case, you agree with him or in case you want to trade with him. You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low.
But the rest of the time you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position. The true investor is in that very position when he owns a listed common stock.
You, as an investor can take advantage of the daily market price or leave it alone, in plain English means that you can sell his shares because the price has gone down, foreboding worse things to come. In my view, a view which I have formed through my past experiences, such signals are misleading. Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.
If you have cash, which is free and is meant to be invested, have a ball today, else, don’t worry about Mr Market. He is having a bad day. But that doesn’t mean you have to have one.
It is my sincere request to all. Do not try to speculate to profit from this fall. Speculation is a habit. You may win once, but the house always wins.
Disclaimer: This message is composed using an edited extract from the book Intelligent Investor By Ben Grahm to calm investor sentiment