One of the big lessons Ben Graham taught in The Intelligent Investor was the difference between investing and speculating. He knew how easily the market distracts investors from their original purpose.
Most investors start off with the idea of compounding their money over a long period of time. But some of them are bound to get sidetracked.
Before they know it, some investors start feeding their impulses triggered by Mr. Market’s manic moods. Their emotions take over. Stocks become pieces of paper, rather than portions of a business, to trade in and out of. Price moves become the only factor behind their decisions.
Seth Klarman used a funny analogy in his book Margin of Safety to describe this mistake. He tells the story of special sardines.