I took our dog for a walk down to the beach last night. It’s one of those white, fluffy things – it has way too much energy and I need a very long lead. I was walking from home, through the dunes, to the beach. I’m going at a slow and steady pace, heading pretty much in a straight line, with only the occasional detour to walk around a fallen log.
The dog on the other hand is all over the place. When it gets excited, it runs well ahead of me. At other times, when spooked, the dog will fall back behind me. Sometimes it will pull on the leash and try and drag me off track. But most of the time, it will just dash all over the place for no obvious reason.
The point is this: no matter what the dog does throughout its journey, it will inevitably arrive at the beach. After all, that’s where I’m heading and the dog is tied to the leash"
Variations on this story are as old as the share market itself and is an analogy for share market behaviour.
I represent company profits, or the intrinsic (or true) value of a share – moving forward steadily and generally consistently. The dog represents the share price – whose movements are completely unpredictable.
Trying to guess which way my dog will run next, is just silly. We do know it’s general direction over time though.
With the markets jittery at the moment, I thought it worthwhile to revisit some recent blogs.
My ten best investment tips
Avoiding investment mistakes
The importance of diversification
If anyone has any questions, feel welcome to contact me.
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