The Unforced Investor

May 30, 2022

A good principle for life in general is to avoid being pressured into things.

Investing is no different.

Jason Zweig, at the Wall Street Journal, has a phenomenal quote from Benjamin Graham, who is considered the father of value investing. Graham wrote, 

But note this important fact: The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by the other persons’ mistakes of judgment.1

Your actions as an investor should come from goals, risk tolerance, and a plan… not from the current price of stocks. To use Graham’s language, what you do must “suit [your] book”.

He calls us to, “disregard the current price quotation.”

Tell us what you really think, Benjamin.

Unfortunately, there are many scenarios where investors become forced investors instead of unforced investors. Here are several:

  • It could be that you are forced into selling because of bad money management. You haven’t had any money in savings and are being cornered into raiding your investments or retirement account because bills are piling up. (That being said, there are extraordinary emergencies that one cannot plan for. No shame here!)

  • It may be that you are attracted to the latest doomsaying soothsayer that knows something no one else knows except for a select group of people that you happen to be connected to. You feel compelled to join up because of peer pressure and dive in headfirst, drastically changing your investments. You are socially (and sometimes even religiously or politically) pressured into bad investment decisions.

  • It might be that you are in a brutal bear market, and you just can’t take the drop anymore, so you push the sell button even though you never would have taken profits on the very same investments a few months back when those investments were up. You were so afraid of taking the gain due to potential taxes when poof not only does Uncle Sam not get any money gained—you don’t either.

  • Maybe the media plays too big of a role in your life. Your emotions are hinged to it. You would be better if your stocks didn’t have a price quotation at all, especially on a daily, moment-by-moment basis. You are far too plugged in. Hogtied to the latest financial drama and prone to act on price swings and extreme (be they scary or overly rosy) economic articles.

  • It may be that a financial advisor is unduly pressuring you to buy or sell a particular investment product. If they are promising glory, you should probably think twice. At least ask them, what’s in it for them? Look for a long-term advisor not a salesperson.

Are you prone to any of these kinds of pressures?

Admit it. Know your weaknesses.

We all have them.

We are here to form Unforced Investors.



1. Quoted by Jason Zweig in his WSJ article “Big Ben” May 10, 2022.