Showing posts with label ignore the market. Show all posts
Showing posts with label ignore the market. Show all posts

Wednesday 21 October 2009

Ignore the Market!

Benjamin Graham's final words of advice are:  "Ignore the market!"  He suggested that each investor should try to think of investment as if you were in business with a mad partner called 'Mr. Market'.  Occasionally, 'Mr. Market' is highly optimistic and he is willing to buy your share of the partnership at any price you name.  At other times, 'Mr. Market' is highly pessimistic and is willing to sell you his share of the partnership at any price you offer.

How can one behave rationally in such a situation?

The best approach will be to accept his offer when he is optimistic and buy it back from him when he is pessimistic.  Each time your share of the partnership cycles back and forth, you will make a handsome profit.  Since the stock market is indeed completely manic-depressive, the only right thing to do is to buy and sell on your own terms and not that of the market.