The Business of Value Investing.pdf

162 The Business of Value Investing

quarter or two of operating results. From all angles, investors are

given data in meaningless forms. The fi nancial media breaks down

the performance of stocks by the hour, as if investment results were

determined at the end of the day. If the market were open only a

few times a year, I believe many more investors would enjoy far bet-

ter performance.

Avoid Meaningless Data

Today ’ s investors are bombarded with split - second information

from all directions. Whether it is the fl ashing numbers and charts

on CNBC or Bloomberg or market opinions from the hundreds of

fi nancial media Web sites, investors have more information than

they need. While such plentiful information might seem like an

advantage, it can often do more harm than good. Seeing a stock

decline 20 percent in a single day is very unsettling to most inves-

tors and often prompts them to reach for the “ sell ” button.

Stock prices are important on only two occasions: (1) when you

are presented an opportunity to buy a good business at a cheap

price, and (2) when you can sell a once - undervalued business at

or above fair value. Any other time, they ’ re meaningless. Sure, if

you ’ re investing for future major expenditures, such as a child ’ s

college tuition, knowing the value of your portfolio at a certain

time is quite helpful. Still, if you buy at the right price and base

your asset allocation on your specifi c needs, daily price changes

don ’ t mean much.

The Benefits of a Buy - and - Hold Approach

The stock market exists to let investors buy stakes in businesses, and

business owners know that temporary setbacks are inevitable. You

don ’ t see them rushing to sell their business to the highest bidder,

and neither should you. The market should serve your investment

decisions, not guide them.

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