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ARE YOU A SPECULATOR?

Consider this excerpt:

Benjamin Graham, who believed in buying wonderful companies at a fair price rather than a fair company at a wonderful price, defines an investor as “an individual whose investment provides two quantitative qualities – safety of principal and an adequate rate of return.” There are many intricacies within business ownership investments, but does everyone in the stock market consider these particulars when investing in business ownership? Of course not, because not everybody in the stock market is an investor. Individuals who desire to become investors must enter the arena with goals that have a long-term investment horizon. Warren Buffett, a global financial market guru and head of Berkshire-Hathaway, puts it best when he says: “It’s bad to go to bed at night thinking about the price of a stock. We think about the value of a company and the company results; the stock market is there to serve you, not instruct you.”Hence, an investor does not buy a price and will not be affected by the ups and downs of the market. A sound investor buys well-managed businesses, with strong earnings growth and significant barriers to entry that will provide long-term security. A ‘purchaser of price’ is a speculator; a ‘purchaser of solid businesses’ with sound fundamentals is an investor.Mark Croskery

Trading in the Footsteps of Sherlock Holmes- Book Review

Some books are too clever by half. Anthony Trongone’s Trading in the Footsteps of Sherlock Holmes: Balancing Probabilities for Successful Investing (W & A Publishing/Traders Press, 2010) is one of them. The idea—to encourage traders to adopt an analytical mindset and achieve emotional discipline by relying heavily on quotations from Sherlock Holmes novels and stories—sounded promising, even fun. And fun is a rare commodity in trading books. Although the book started off well, as it progressed Holmes became a less and less useful coach and analogies from detecting to trading became increasingly strained. It’s hard, for instance, to invoke Holmes in a discussion of order types.

But why waste a post emphasizing the negative when there are so many passages that will undoubtedly delight traders who are fans of Sherlock Holmes? Herewith a very limited sampling. (more…)