The Starter Investor Buys Stocks
But the following insight should help: "On the whole it may be better for the investor to do his stock buying whenever he has money to put in stocks, except when the general market level is higher than can be justified by well-established standards of value" says Benjamin Graham in Chapter Two of his book The Intelligent Investor: The Classic Text on Value Investing.
Sometime in February 2007, we needed to make a choice between keeping our cash on hand or making an investment and buying 10 shares of Ayala Corporation at 630 pesos per share when the general market level is high by my reckoning.
Deciding to invest in stocks
Keeping the money with me will expose my funds to the greater risk of tempting alternatives like buying a digital camera, eating out and going shopping, or enrolling in that short course for a home-based business. I ended up buying the Ayala Corporation stock and assuring myself that it is better to have a long-term investment and a possible paper loss of 50 percent that can be fully recovered over time than no investment at all.
Stock and cash dividends
By the end of March 2009, I had received 4 shares for stock dividends, about 137 pesos for cash dividends, and 128 pesos for value of fractional shares from the stock dividend.
Based on the closing price of 206 pesos, the nominal valuation of my investment portfolio is about 3,150 pesos. The total cost, however, of my investment including BPITrade upliftment fee is 6,515 pesos. This meant I had a paper loss of nearly 52 percent.
Precisely, my paper loss is almost the value approximated by Benjamin Graham that an investor may experience in a well-defined bear market.
Therefore, so long as there is no "convincing indication that the underlying values have been permanently affected" - this Starter Investor has no worries.
lost money, that's it..
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