To the extent that the investor’s funds are placed
- in high-grade bonds of relatively short maturity—say, of seven years or less—he will not be affected significantly by changes in market prices and need not take them into account.
- (This applies also to his holdings of U.S. savings bonds, which he can always turn in at his cost price or more.)
- His longer-term bonds may have relatively wide price swings during their lifetimes, and
- his common-stock portfolio is almost certain to fluctuate in value over any period of several years.
- certainly through an advance in the value of his stock holdings as time goes on, and
- perhaps also by making purchases and sales at advantageous prices.
- It is easy for us to tell you not to speculate; the hard thing will be for you to follow this advice.
- Let us repeat what we said at the outset: If you want to speculate do so with your eyes open, knowing that you will probably lose money in the end; be sure to limit the amount at risk and to separate it completely from your investment program.
What can the past record of the market actions promises the investor—
- in either the form of long-term appreciation of a portfolio held relatively unchanged through successive rises and declines,
- or in the possibilities of buying near bear-market lows and selling not too far below bull-market highs?
Ref: Intelligent Investor by Benjamin Graham.