Benjamin Graham: Voting Machine, Weighing Machine
When Benjamin Graham said: "the stock market is a voting machine in the short-term, and a weighing machine in the long-term" What did he mean by that? Well, he meant that in the short-term, the stock market (and stock prices) are the result of the collective whims of individuals participating in the stock market (i.e. buyers and sellers), bidding up or down the price of a share or stock. However, in the long-term, the fundamentals of a business - whether the business is profitable, growing, and will continue to grow, ultimately determines a stock's value (or in other words the value of a share in that business). So how does this play out in simple terms? The stock market is a voting machine in the short-term : People don't need to buy things out of reason. Some, or even most of the time, people will buy things because they like them or they feel like buying it. To be quite honest, no one really needs a good reason to do anything. Of course, you want to be rational w