The Compass and the Map

“The individual investor should act consistently as an investor and not as a speculator. This means.. that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase.” -Benjamin Graham

Yesterday afternoon I spent a fair amount of time remembering when I first started learning about investments how badly I wanted a road map that told me how to get from where I was to where I wanted to be. This morning I read a post in Seth Godin’s wonderful blog entitled “The Map Has Been Replaced by the Compass.” Sometimes things just come together. There isn’t any road map. Imagine if your GPS needed to be updated every second. The markets change too fast. With the advent of high speed computerized trading, information can literally become obsolete in milliseconds.

Seth observes, “The compass, on the other hand, is more important than ever. If you don't know which direction you're going, how will you know when you're off course?” Fortunately there are some compasses available. Solomon, for example, is a proponent of diversification and systematic investment. The Intelligent Investor by Benjamin Graham is a timeless classic. Although just about all the companies he discusses in a book first published in 1949 are bankrupt or a part of some other company, the principles he expounds are as valid in the 21st century as they were two years before I was born.

Once I purchased Technical Analysis for Dummies by Barbara Rockefeller, a respected expert in her field. Although I decided I was not cut out to be a trader, this book provided me with a compass, the basic principles and discipline used by successful traders. More importantly, if I was so inclined, her book provided an excellent bibliography of the finest available texts on the subject.

Seth ends his post with the observation, “If you don't know which direction you're going, how will you know when you're off course? And yet...And yet we spend most of our time learning (or teaching) the map, yesterday's map, while we're anxious and afraid to spend any time at all calibrating our compass.”

Ecclesiastes Chapter 11

[1] Cast thy bread upon the waters: for thou shalt find it after many days.
[2] Give a portion to seven, and also to eight; for thou knowest not what evil shall be upon the earth.
[3] If the clouds be full of rain, they empty themselves upon the earth: and if the tree fall toward the south, or toward the north, in the place where the tree falleth, there it shall be.
[4] He that observeth the wind shall not sow; and he that regardeth the clouds shall not reap.
[5] As thou knowest not what is the way of the spirit, nor how the bones do grow in the womb of her that is with child: even so thou knowest not the works of God who maketh all.
[6] In the morning sow thy seed, and in the evening withhold not thine hand: for thou knowest not whether shall prosper, either this or that, or whether they both shall be alike good.