The Immortal Words of the Intelligent Investor-Ben Graham 

1.  It requires strength of character in order to think and to act in opposite fashion from the crowd and also patience to wait for opportunities that may be spaced years apart.

DYI Comments:  Below is the Dow/Gold Ratio chart that shows very clearly that gold peaked in 1980 (and stocks on the give away table) and moved into a secular bear market lasting until July of 1999.  Stocks peaked at that time and then moved into a secular bear market.

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Value players in the late 1970's and early 1980's were purchasing stocks on an aggressive basis while at the same time systematically selling off their gold/gold mining companies.  As months turned into years and as years turned into decades did our value player forget gold?  NO!  They continued to monitor the ratio for secular over valuation of stocks and under valuation of gold.  The trip from overvaluation to under was almost two decades!  THAT'S PATIENCE!

2.  If a company was so sound that its stock carried little risk of loss, the company also must present excellent chances for future gains. It is easier for a company to build a profitable empire on a solid foundation than on a shaky one.

That is the premise of DYI's  THE DIVIDEND ROOM.  I look for high quality blue chip companies that have an excellent dividend yield 50% greater than the S&P 500.  Then hold to these companies for years only selling when their financial rating goes below investment grade or the current dividend yield falls below the S&P 500.  Benjamin Graham's defensive investor at its best.

3. Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop.

Greed and Fear is an immortal as time itself.  This is basic instinct for the value player who will look at the financials to determine after a drop to purchase additional shares or in the case of rise in price to make a sale.  Under no circumstances is he or she feels forced to buy or sell.  Mr. Market is not the value players enemy but his friend.  Wikipedia had to say about Ben's Mr. Market.

Mr. Market is an allegory created by investor Benjamin Graham. Graham asks the reader to imagine that he is one of the two owners of a business, along with a partner called Mr. Market. The partner frequently offers to sell his share of the business or to buy the reader's share. This partner is what today would be called manic-depressive, with his estimate of the business's value going from very pessimistic to wildly optimistic. The investor is always free to decline the partner's offer, since he will soon come back with an entirely different offer

4. Experience teaches that the time to buy stocks is when their price is unduly depressed by temporary adversity. In other words, they should be bought on a bargain basis or not at all. 

DYI'S THE DIVIDEND ROOM look's for beaten down companies for what ever reason.  Most of them are just on the basis of neglect.  Wall street has its fads and fashions of the moment to were the majority of investors (actually speculators) go galloping off riding the lasted hot stock(s) of the moment. Leaving great companies with great financials who's stock prices will become depressed in price over time simply due to neglect. Many of our stable of companies have yields double that of the S&P 500 with excellent prospects of increasing dividends.

5. People who habitually purchase common stocks at more than about 20 times their average earnings are likely to lose considerable money in the long run.

Amen to that Ben!  Currently today the majority of stocks on a value basis have been bid up to the moon.  Our worlds central banks sub atomic low interest rates have pushed our 1st world Boomer's seeking yield for their massive savings pool along with the U.S. budget deficits artificially pushing our economy forward.  Below is the Shiller PE10 going all the way back to 1871 it is easy to see that stocks on a whole sale basis are once again "jacked up" in price.

http://www.multpl.com/shiller-pe/

DYI's averaging formula for stocks has now pushed us out of the market.  Currently today the the price to dividend ratio is now 122% above their average going back to 1871.  Below is our aggressive portfolio.  Any wonder why I'm so defensive?

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION

Active Allocation Bands (excluding cash) 0% to 60%

83% - Cash -Short Term Bond Index - VBIRX

15% - Gold - Precious Metals & Mining - VGPMX

 2% - Lt. Bonds - Long Term Bond Index - VBLTX

 0% - Stocks - Total Stock Market Index Fund - VTSAX

[See Disclaimer] 

Most investors (speculators) will keep on dancing along as the music keeps on playing.  Most will not recognize a short term minor correction from the beginning of a major onslaught of the bear. They will not begin to sell until they are half or more through the bear's rampage.  Average John and Jane Doe will sell out at the bottom to never buy stocks again.  Once bitten twice shy.

6. On the other hand, investing is a unique kind of casino – one where you cannot lose in the end, so long as you play only by the rules that put the odds squarely in your favor. 

7. In market analysis there are no margins of safety; you are either right or wrong, and if you are wrong, you lose money. 

8. It remains true that sound investment principles produced generally sound results. 

9. The disciplined, rational investor neither follows popular choice nor plays market swings; rather he searches for stocks selling at a price below their intrinsic value and waits for the market to recognize and correct its errors. It invariably does and share price climbs. When the price has risen to the actual value of the company, it is time to take profits, which then are reinvested in a new undervalued security.

Sound investment principals produce sound results!  At DYI I will trade with Mr. Market when the odds of success is in our favor.  I'm not forced by quarterly results in order to maintain my job as a money manager and hence forced to speculate.  I'll place my hard earned dollars, Pounds, Euros or Yen to work when Mr. Market offers me a bargain and only then.

10. Never mingle your speculative and investment operations in the same account, nor in any part of your thinking.

Speculative operations are not part of my blog.

11. The determining trait of the enterprising investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than the average. Over many decades, an enterprising investor of this sort could expect a worthwhile reward for his extra skill and effort in the form of a better average return than that realized by the passive investor. 

12. Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble to give way to hope, fear and greed. 

13. The stock investor is neither right nor wrong because others agreed or disagreed with him; he is right because his facts and analysis are right. 

14. An investment is based on incisive, quantitative analysis, while speculation depends on whim and guesswork.  

15. The intelligent investor is a realist who sells to optimists and buys from pessimists. 

Point 15 is what this blog is all about selling to the optimists and buying from the pessimists.

So, what has all this taught me? 

(a) People buy when others are buying and sell when everyone sells. 

(b) The greatest motivator isn’t profit, but fear. 

(c) We all misinterpret risk. It’s not losing money but lacking it. 

(d) Nobody invests when stuff is cheap. 

(e) Financial illiteracy is the norm.

DYI