feature Portfolio Purchasing Power Putting dividends into perspective Success means different things to different people, and financial and business success comes in many varieties. “ W Mike Magreehan, CFP, is an investment advisor with Canaccord Wealth Management in Waterloo, Ontario. Mike welcomes your comments and questions at 1-800-�d;  OR MIKE�e;MAGREEHAN canaccord.com. Visit www.LMwealth.com. ho is Warren Buffett?” If we asked a room full of strangers, chances are the ma-jority would identify Buffett as the world’s richest man, a billionaire or a phi-lanthropist. If we asked this same crowd of people to name Warren Buffett’s “mentor,” quite likely only a few would correctly distinguish him as Benjamin Graham. Warren Buffett attributes much of his success to the teachings of Graham, who co-authored the bestseller Security Analysis ÊÊ£Î{]Ê>ÊLÊÜ V Ê>`ÊÌ iÊÌiiVÌÕ>Ê foundation for what later would be called “value investing.” Buffett was so influenced by Graham, that he even named his eldest son Howard Graham Buffett. SUCCESS AND RISK Many would credit Buffett with being the world’s most successful investor. But success means different things to different people, and financial and business success comes in many varieties. Simply put, a person is successful because he won more than he lost. The successful investor is wealthy due to correctly identifying risk and then taking appropriate steps to mitigate it and to prevent disaster. In defining risk, Graham distinguished between a temporary loss of value and a per-manent loss of capital . A temporary loss of value in a diversified portfolio is a rebalanc-ing opportunity to the investor that prudently sees it as such. He went on to say that a permanent loss of capital is a disaster that should be avoided. I can’t disagree – be-cause it takes more time and fresh capital to rebuild that initial position had it not been lost in the first place. In a highly diversified portfolio where risk has been diversified away, Graham’s definition of a complete disaster is extremely rare, as we will soon see. Throughout history, there have been many challenging periods. Temporary losses of value are frequent; at times they can become so frightening that they turn out to be permanent losses – for those who succumb to their emotions and sell. www.canadianchiropractor.ca Mike Magreehan, CFP s CANADIAN CHIROPRACTOR | FEBRUARY 2013
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