Timing vs Pricing

Warren Buffett, Benjamin Graham and John Bogle advise Value Investors to focus on Pricing rather than Timing.

Warren Buffett

How does one know, on any given day, if the next day or month or year is going to be more optimistic or less? Also, to invest at the right time, one would have to have divested earlier at the right time.

"We try to price, rather than time, purchases."

Ben Graham

Benjamin Graham — Buffett's mentor and founder of Value Investing — advises investors to focus on pricing their investments, rather than timing them.

"By pricing we mean the endeavor to buy stocks when they are quoted below their fair value and to sell them when they rise above such value. A less ambitious form of pricing is the simple effort to make sure that when you buy you do not pay too much for your stocks.

We are convinced that the intelligent investor can derive satisfactory results from pricing of either type. We are equally sure that if he places his emphasis on timing, in the sense of forecasting, he will end up as a speculator and with a speculator’s financial results."

Benjamin Graham, Chapter 8 - The Investor and Market Fluctuations, The Intelligent Investor.

John Bogle

John Clifton "Jack" Bogle — founder and former chief executive of The Vanguard Group — once gave five simple principles for investing. At a 2001 meeting at the National Press Club, Bogle said:

On Low Prices

"The answer is yes, continue to invest. I told the young people in the office who are really petrified by this market decline, that it’s the best thing that ever happens. If you think about it logically, of course, it’s wonderful.

This young man I was talking to yesterday was probably 25 or 26 years old, and he’s got the rest of his life to invest. I said, "Let’s suppose, Chris, the markets end up at Jim Glassman’s 36,000 by the time you retire, do you want to be investing your money when the Dow is 35,000 or invest it all when it’s 9,000?"

You want a long time to invest at low prices. It’s certainly a frightening advantage for those of us who have some money at work in the market today to think of this as a blessing. But it is a blessing because in the long run, investing depends on accumulating money at sound prices and not inflated prices like we have.

I also think the general economy and the financial markets are well-served by a return to reality. When you leave reality and depart from the laws of gravity, there’s nothing but bad things that can happen; and the higher you fly, the more you fall.

We flew quite high enough and I think it’s a blessing — maybe a blessing in heavy disguise — but a blessing that we come back a little bit toward the ground."

John C. Bogle, The National Press Club (2001).

On Timing

"You can only hold tight if you bought right.

This has something to do with how many years you have to accumulate money, how much resources you have at stake, how much income you need, and how much courage you have to ride out the peregrinations of the market.

I don’t know anybody who’s ever been successful in timing the market. I don’t even know anybody who knows anybody who has ever been successful in timing the market."

John C. Bogle, The National Press Club (2001).

Buying Right

Bogle's aphorism about how one "can only hold tight if you bought right" is also echoed in the sound old business proverb:

"As the saying goes, a stock well bought is half sold. I think Ben was an expert in that area."

Walter J. Schloss, Benjamin Graham and Security Analysis: A Reminiscence (1976) [PDF].

Graham wrote "Investment is most intelligent when it is most businesslike"; and any experienced businessman knows that profit is always made in the first half of the business transaction.

"Always remember: Profits are made in the buying, not in the selling."

Robert T. Kiyosaki, Chapter Nine: Here Are Some To Do’s, Rich Dad Poor Dad (1997).

Graham also wrote extensively on the pitfalls of stock speculation and day-trading.

Watch Videos

Bogle On Low Prices

Bogle On Timing