The Business of Value Investing.pdf

174 The Business of Value Investing

things to do because it requires the investor to go against the crowd

psychology. It requires the investor to do the opposite of what the

majority is doing. It requires the investor to go at it alone. Doing

these things goes against most other conventional aspects of soci-

ety and human nature. Our minds and our lives are geared toward

accepting the overall consensus. Our president is elected by a

majority vote; victory in sports is determined by the collaboration

of the team; and important decisions are made after consultation

and agreements of the members involved. In these instances and

many others, there is tremendous value in going with the group, or

crowd. However, when it comes to investment, there are going to

be moments when an investor is out on his own and his handling of

the pressures that come with being the solo man out will be crucial.

Before proceeding to detail the benefi ts of purchasing securities

during moments of maximum pessimism, it ’ s instructive to aggre-

gate the requirements that have been outlined so far for a value -

oriented intelligent investment philosophy.

Putting It All Together

The ability to make a signifi cant investment in a security at time

of distress and uncertainty is very a tough thing to do because it

requires a high degree of mental fortitude. However, the diffi culty

in this decision is signifi cantly reduced when you have established

the fundamental framework to successful value investing that has

been outlined in the last fi ve chapters of this book.

First and foremost, you must develop a sound investment phi-

losophy. This book wholeheartedly favors the philosophy estab-

lished over 70 years ago by Ben Graham and his colleague David

Dodd at Columbia University. It simply states that investments are

made when thorough research, capital preservation, and satis-

factory returns are anchors upon which the investment decision

rests. Decades later, the teachings and philosophies of Graham

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