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Hi Everybody,

Here's some of my take on Chapter 8 - The Investor & Market Fluctuations.

I think that this chapter is so key to successful investment thinking that I'm going to take some greater time with a few of the chapters concepts.

"Longer term bonds may have relatively wide price swings during their lifetimes and a common stock portfolio is almost certain to fluctuate in value over any period of several years. The investor should know about these possibilities and should be prepared for them both financially & psychologically.

Since common stocks, even of investment grade, are subject to recurrent and wide fluctuations in their prices, the intelligent investor should be interested in the possibilities of profiting from the pendulum swings.

There are two possible ways by which he may try to do this: the way of timing and the way of pricing. By timing we mean the endeavor to anticipate the action of the stock market - to buy or hold when the future course is deemed to be upward, to sell or refrain from buying when the course is downward. By pricing we mean the endeavor to buy stocks when they are quoted below their fair value and to sell when they rise above such value.


II is convinced that the intelligent investor can derive satisfactory results from pricing of either type. They are equally sure that if he places his emphasis on timing, in the sense of forecasting, he will end up as a speculator and with a speculators results. "


Mr. Buffett has often said that the concepts behind successful investing are not as hard to master as the discipline needed. I think that this portion of Chapter 8 demonstrates this idea perfectly.

I think that if one could have only a single piece of advice to base their investment program on, "Make sure you do not pay too much for your stocks" would serve the investor very well. The key point being that like other avenues of consumerism, it is imperative to calculate what you are paying relative to what you are getting. The tricky part is being able to stick to the resolve not to overpay when one is bombarded with "expert" and associate tips and assurances for gain.

On a personal level, a most difficult temptation to ignore is when a situation that was deemed slightly too expensive moves significantly up in price. This situation where the common thought is that money not made can be equated to money lost can easily lead to a (probably) unwise loosening of prudent investment pricing. For me, this is where the discipline is needed to realize that money not made is not equivalent to money lost and to realize that in the long run a greater benefit will be received by holding firm to the valuation methodology.

Helpful to remember is Mr. Buffett's qoute,

"This is the cornerstone of our investment philosophy. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results."

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