value
A share is a piece of a business
The rule
Treat a share as owning a small piece of a real company, not a blinking number on a screen to trade.
Where it flips
But owner-thinking can become an excuse to ignore a business that is truly broken. The fix is to keep judging the business itself. If the ovens really are failing, owner-pride is no reason to hold.
The one mental shift that separates investors from gamblers is this. See a stock as a slice of a business with earnings, assets and a management. Something you could sensibly own even if the market shut for ten years. The daily price then becomes a service you may use, not a verdict you must obey.
A worked example
Haridya owns shares of a biscuit maker. When the price drops 20% on no real news, she checks the ovens are still running and the brand still selling. She feels she owns a cheaper slice of the same business, not that she has "lost". [illustrative]
How to spot it
- ·reacting to the screen price, not the business
- ·no view of the company behind the code
- ·could not hold it if the market shut for years
Benjamin Graham · The Intelligent Investor