I am reading this book called “The Intelligent Investor” by Benjamin Graham. Based on it I felt sharing some of the points I took from it that might be suitable for the current market trend in Nepal.
Investing isn’t about beating others at their game. It’s about controlling yourself at your own game. The challenge for the investor is not to find the stocks that will go up the most and down the least, but rather to prevent yourself from being your own worst enemy—from buying high just everyone is buying and from selling low just because everyone is selling.
People need not panic when the market is in a downward trend, be it a pullback (sudden decrease in the bullish market) or retracement (reversal or the bullish trend in the long term). Instead, they should add more stocks to their portfolio at this time.
How would it feel if the news is read in the following way on the day when the market decreases massively:
“Stocks became more attractive yet again today, as the NEPSE dropped by a whopping 6% on heavy volume—the fourth day in a row that stocks have gotten cheaper. Life Insurance investors fared even better, as leading companies like NLIC lost nearly 10% on the day, making them even more affordable. That comes on top of the good news of the past year, in which stocks have already lost 50%, putting them at bargain levels not seen in years. And some prominent analysts are optimistic that prices may drop still further in the weeks and months to come.”
It would be interesting wouldn’t it be?
There is a technique called Dollar-cost averaging. When you dollar-cost average, you invest equal dollar amounts in the market at regular intervals of time. The idea is to get the best deal on a desired investment by controlling for market fluctuations. Rather than trying to time the market, you buy in at a range of different price points. This not only makes the portfolio strong further you would decrease the taxable income by lowering ta WACC and excluding the taxes because of regular trading.
The downward trend is a perfect time for expanding the portfolio. In doing so, you would still own a company whose future you believe in—but now you would own it for a lot less than you paid the first time.
Investing is not life!
The writer asked these people—mostly in their seventies—if they had beaten the market over their investing lifetimes. Some said yes, some said no; most weren’t sure. Then one man said, “Who cares? All I know is, my investments earned enough for me to end up in Boca.”
Could there be a more perfect answer? After all, the whole point of investing is not to earn more money than average, but to earn enough money to meet your own needs. The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that is likely to get you where you want to go. In the end, what matters isn’t crossing the finish line before anybody else but just making sure that you do cross it.
P.S. No one’s gravestone reads “HE BEAT THE MARKET.”