Friday, May 11, 2007

Benjamin Graham Loved Traders Too

I read a lot of different blogs which focus on one style of investing to the exclusion of another. As I have mentioned before, I do not believe that there is only one style of investing or trading that can lead to success. Nor to I believe that there is a "right" way to invest or trade. Rather, I embrace the idea that every new investor or trader must find that style which fits their specific skill set in order to achieve market success.

I am glad to see that I am not alone in this approach to achieving stock market success. Most stock bloggers will be surprised (especially the more ardent fundamental investor) to know that Benjamin Graham supported such a view. Towards the end of his life, Mr. Graham stated that one should do those things that you know you can do well.

As detailed in "The Rediscovered Benjamin Graham: Selected Writings of the Wall Street Legend" Mr. Graham specifically stated that:

If you can really beat the market by charts, by astrology, or by some rare and valuable gift of your own, then that's the roe you should hoe. If you're
really good at picking stocks most likely to succeed in the next 12 months, base your work on that endeavor. If you can foretell the next important development in the economy, or in technology, or in consumers' preferences, and gauge its consequences for various equity values, then concentrate on that particular activity. But in each case you must prove to yourself by honest, no-bluffing self examination and by continuous testing of performance, that you have what it takes to produce worthwhile results.

Of course, Mr. Graham made clear that fundamental investing with a margin of safety was best in his opinion because that worked for him. But as the above passage indicates he acknowledged and accepted that each investor and trader must determine for themselves which means would provide success, provided that the selected means was subject to rigorous testing to ensure its validity.

Although it is difficult for the new trader or investor to cancel out the noise of various sources which champion exclusively one point of view, that is what you must do. In the end, being honest with yourself, even if it means following a system of trading which others may scoff at, is precisely the most important step in achieving stock market success. And if you don't believe me, than heed the words of Benjamin Graham, who eloquently defends the proposition that one size most definitely does not fit all and that we each must strive to identify that manner of investing and trading which best suits us individually.


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sanjeev said...

Stock holdings should be reviewed at least annually, he said, paying attention to dividend returns and the operating results of the company, and ignoring share price fluctuations. Graham felt that as long as the earnings power of the holdings remained satisfactory, the investor should stick with the stock and ignore any market movements, particularly on the downside.

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You should always do those things that you know you can do well. It can't be any simpler than that.

james moylan said...

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penny stocks said...

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Tembakau Lintingan said...

Kui ngetik opo om? Aku ra ngerti blas og. Tapi yowis lah aku rapopo :)