After hearing so much about Benjamin Graham's book “The Intelligent Investor” (Warren Buffett, among others, always refers to it), I recently purchased it and started reading it. And I have to say: the book is heavy. Graham writes pages and pages about the valuation of stock markets in the 1970s (I'm reading the fourth revised edition) or what some US bonds are about. That's really hard to read.

But from time to time you come across phrases full of wisdom. Like this one: Graham writes in chapter eight, often praising, for example, Buffet: “For many investors, it would be better if there were no continually updated prices. Because then they would be spared the torment caused by other people's errors in judgment.”

Graham addresses an important topic here: the importance of current valuations. For him, the true investor is the one who never feels pressured to sell. In fact, he can safely ignore the courses. If they suit him, he can buy or sell them. But it is not necessary. “He needs to pay attention to it and act on it only to the extent that it suits his book, nothing more,” writes Graham literally.

Only a minority decides the price of shares

Just imagine: Deutsche Post has around 1.2 billion shares. As I write this text, the price is at 39.57 euros and around 851,000 shares have been traded. That's just 0.07 percent of all stocks! Why should such a small number decide how much the company is worth? Why should I base my investment decision on this?

This luxury of ignoring current movements is the big advantage that retail investors have over professional investors. Fund managers should be evaluated periodically against some indicators. They cannot afford to submit to the whims of “Mr. Market” (as Graham personifies the financial market) and, when in doubt, they have to sell when panicked customers want their money back.

But if as an investor I become a slave to “Mr. Market”, I renounce this advantage. I no longer play my game, but the game of others. I cannot control market movements in the short term. But I can decide on the costs of my investment, my expectations of profitability, the risk I want to take and, above all, my behavior. Falling prices are not a cause for panic if you have a long-term investment horizon.

A contract with yourself

That's why I like the idea of ​​an investment contract with yourself, which is in the notes of my copy of The Intelligent Investor. For example, it could be like this:

“I hereby declare that I am an investor with a long-term investment horizon. My financial success does not depend on the returns of other investors.

I know there are always phases where prices fluctuate wildly. I hereby declare that I will not allow a group of complete strangers to decide my investments. I assure you that I will not buy just because the market is going up and I will not sell just because it is going down. Instead, I will invest _______ euros each month in a broadly diversified portfolio through a savings plan. I will make additional investments out of order if I have money available that I don't need in the short term.

I further declare that I will hold my investments until at least _________ (Date missing at least ten years) will keep. The only exceptions are situations where I urgently and unexpectedly need money, such as unemployment or serious illness, or planned expenses such as paying off home loans.

By signing, I not only confirm that I will comply with the terms of this contract, but that I will read it every time I want to sell something.

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The newsletter “René wants profitability” is published once a week and analyzes the situation of the financial markets in an entertaining and understandable way. Renowned experts regularly contribute guest contributions. He will also periodically receive valuable advice for his investments, as well as the most attractive offers on accounts and securities accounts.