It has been a long while since I last wrote a post. During this period the study on the book The Intelligent Investor has been in good, though far from excellent, progress.
Several key points and inferences can be drawn so far. Firstly, market price of securities shall be of no interest to the investors unless the price has reached a level that has made the business interest attractive for purchase. This happens either the securities declined in market price or, more unlikely, the business has produced a return that make the market price sensible to its underlying value. This implies that the investors can ignore market prices most of the time. If the investors have the temperament to be calm regardless of the prevailing market trend, he can look at the prices from time to time to screen out interesting opportunities.
Secondly, never look seriously at the figures of consolidated financial statements (and recent earnings). Footnotes accompanying the statements should be able to provide a clearer picture to the financial condition of the business. If necessary, reconstruct the statements for personal use – e.g. using figures that are net of “special charges”, adjusted from amortization and depreciation, and is fully diluted. Such statements covering a minimum period of five years should be able to give the investors some idea on the financial health of the business and how “aggressive” the company is when preparing financial statements. In addition, such statements may uncover “cloaks” that makes some companies appear unprofitable.
Another point that is more unrelated to the science of investing is the investors’ attitude towards the surrounding – i.e. the markets and the general public. It’s best to steer clear of the influences, particularly bad ones (that’s something you might not recognize even when it’s too late) and keep focus on own conformity with the proper investing principles. The self-discipline principles are easy enough – better to do something unspectacular than impossible, never be greedy, never insist to derive trend from events that are “absurd” and never let anyone exert too much influences over you. Simple it is to be said, (you know what this part of sentence is…).
Over the years of 2002 to 2005 some really handsome profits have been unloaded through investment in gold, and the puff-up feeling of being an “investor” starts to build up. What a naïve idea… After reading the book I should refer it more like a “speculation” than “investment”. An overview of definitions: Thorough analysis? No, more guesswork than deductions; Safety of principal? Has been taken for granted; An adequate return? The gains would be wiped out if it is done in late 1970s… A good (and lucky) lesson for me…
As I’m quite ‘busy’ (or lazy?) right now, I don’t know when will the next post show up. Maybe I’ll die moments after posting this article, since the world is so unpredictable…
