Should the intelligent investor be interested in the possibilities of profiting from these pendulum swings?
There are two possible ways he may try to do this:
- the way of timing and
- the way of pricing.
By timing, the investor try to anticipate the action of the stock market - to buy or hold when the future course is deemed to be upward, to sell or refrain from buying when the course is downward.
By pricing, the investor endeavours
- to buy stocks when they are quoted below the fair value and
- to sell them when they rise above such value.
A less ambitious form of pricing is the simple effort to make sure that when you buy you do not pay too much for your stocks.
This may suffice for the defensive investor, whose emphasis is on long-pull holding; but as such it represents an essential minimum of attention to market levels.
Pricing or Timing?
The intelligent investor can derive satisfactory results from pricing of either type.
If he places his emphasis on timing, in the sense of forecasting, he will end up as a speculator and with a speculator's financial results.