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Tags: Investing | market | buffett | graham

In the ‘Art’ of Investing, Learn From the Masters

By    |   Friday, 27 April 2012 06:52 AM

“The Intelligent Investor” by Benjamin Graham was the first book I ever read about investing

In chapter 8, Ben Graham introduces a character named Mr. Market. Mr. Market is an imaginary business partner that the great value investor Graham uses to tell his story.

For example, imagine you own a piece of a private business. One of the other owners, Mr. Market, approaches you daily to tell you what he thinks your share of the business is worth. He either offers to buy your share of the business or to sell you an additional share of the business.

Every day, the price he quotes is different.

Editor's Note: Inside the World’s Greatest Retirement Lie
Find Out the Truth, See the Details.

Sometimes it seems high, sometimes it’s low, and sometimes it sounds fair.

“If you are a prudent investor or a sensible businessman,” Graham writes, “will you let Mr. Market’s daily communication determine your view of the value of a $1,000 interest in the enterprise? Only in case you agree with him, or in case you want to trade with him.”

“You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low,” Graham continues.

“But the rest of the time, you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position.”

Simply put, Mr. Market is here to serve you — not to guide you

I have my own views of what stocks are actually worth and when Mr. Market "miscalculates," then and only then do you strike

The reason that 100 percent of my conservative portfolio selections have been profitable and my Dividend Machine subscribers have earned 25 percent annual compounded returns is because I have never forgotten Graham’s words.

This has been accomplished with a portfolio which Mark Hulbert of the famous Hulbert Financial Digest grades as low risk.

Editor's Note:
Inside the World’s Greatest Retirement Lie
Find Out the Truth, See the Details.

Low risk is a volatility which is at least 40 percent less than the Wilshire 5000 index.

In the past year, the Dividend Machine had the highest ranking amongst every portfolio in the past year that was low risk.

It was no accident and I can credit my success to my study of Graham.

Never heard of Graham? Maybe you have heard of his most famous pupil and the only person to earn more than $200 billion for himself and his investors: Warren Buffett, the Oracle of Omaha and the greatest investor of all time.

If you want to start investing like him, you need to follow one of his disciples with a good track record.

About the Author: Bill Spetrino

Bill Spetrino is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of the Dividend Machine. Discover more by Clicking Here Now.

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Friday, 27 April 2012 06:52 AM
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