Price Changes as Measuring Investment Results

When the general market declines or advances substantially ....
.... nearly all investors will have somewhat similar changes in their portfolio values.

Benjamin Graham, in his book Intelligent Investor, wrote that the investor should not pay serious attention to such price developments unless they fit into a previously established program of buying at low levels and selling at high levels.

The investor is neither a smart investor nor a richer one when he buys in an advancing market and the market continues to rise.

That is true even when the investor cashes in a goodly profit, unless either
(a) he is definitely through with buying stocks - an unlikely story - or
(b) he is determined to reinvest only at considerably lower levels.

In a continuous program no market profit is fully realized until the later reinvestment has actually taken place, and the true measure of the trading profit is the difference between the previous selling level and the new buying level.

The INVESTMENT SUCCESS of the investor may be judged by a long-term or secular rise in market price, without the necessity of sale.

The proof of that achievement lies in the price advances made between successive points of equality in the general market level.

In most cases this favourable price performance will be accompanied by a well-defined improvement in the average earnings, in the dividend, and the balance-sheet position.

Thus in the long run the market test and the ordinary business test of a successful equity commitment tend to be largely identical.



SUMMARY
Most of us are invested for the long run.
Even if you manage to sell your investment for a profit from your previous buying price, no market profit is fully realized until you have reinvested this amount back into the market.
Your trading profit is the difference between the previous selling level and the new buying level.