Market Fluctuations: How to Act When They Happen

Chapter 8 of The Intelligent Investor focuses on dealing with market fluctuations. Graham opens this chapter advising investors to know about the possibility of these ups and downs. He urges us to be prepared financially and psychologically.

To be clear about the nature of potential fluctuations, Graham describes a probable set of circumstances. Within the next five years, shares of a given security may experience a 50+% price increase from its low point or a 30+% decline from its high point. Such changes in stock prices may bear no relationship to changes in economic values.

While the rise in prices sounds great, the decrease seems scary. Still, it’s this scenario for which Graham wishes to equip investors to withstand (and possibly profit from). He offers advice that I interpret in this way:

Understanding The Intelligent Investor by Benjamin Graham

I am collaborating with Joseph Hogue, Chartered Financial Analyst (CFA) on a chapter-by-chapter review and analysis of The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham.

We are reviewing the latest edition of the book that contains a preface by Warren Buffett, billionaire investor and Graham student, and commentary by Jason Zweig, a financial journalist who now writes a column for the Wall Street Journal. This edition covers investment history and Graham’s insights on current events through 1972. Zweig’s commentary is more recent, written from a 2006 vantage point.

Investing Lessons from the Shark Tank Cast

Over the weekend, I read an article in AARP The Magazine highlighting investment tips from the Shark Tank cast. This magazine is geared toward the 50 and over crowd but the investing lessons seem applicable to investors of all ages, skill levels, and financial means.

Shark Tank, a half-hour business reality show, centers on the pitches of budding entrepreneurs to the sharks (wealthy, business-savvy investors) and the ensuing dialogue. It’s entertaining, educational, and nerve wracking. What’s fascinating is the decision-making processes of the investors, who may commit money to a venture along with their time, credibility, and business acumen.

Generally, I watch the show from the perspective of the entrepreneur. But, as an investor, it’s helpful to consider opportunities from the sharks’ points of view. Watching the show from the shark/investor perspective (and reading the magazine article) helped me glean investing wisdom from the Shark Tank cast. Here’s what I learned: