The Intelligent Investor, Rev. Ed – Benjamin Graham

The Intelligent Investor, Rev. Ed – Benjamin Graham

A classic guide on investing.

The Characteristics of The Intelligent Investor

Types of Investors

The former requires continuous research of stocks, bonds, and mutual funds and this type of investor exerts much time and energy, while the latter has a fixed portfolio that runs autonomously regardless of the situation.

If you plan to become an investor, pick the type that best suits your personality to ensure the longevity of the approach.

Once you have your capital, invest 50% of it into bonds or an index fund (depending on market conditions), while the other 50% should be invested in individual stocks.

For the Enterprising Investor

Before investing your capital:

Margin of Safety

Margin of Safety

 

This is a principle of investing wherein an investor purchases securities only when their market price is significantly below their intrinsic value.

The formula to determine the intrinsic value of something is:

Margin of Safety = Market Cap / Deep Value Bargain Investing

Remember, the market swings wildly from day to day and presents large changes in valuation over periods of euphoria and pessimism.

The stock investor is neither right or wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.

What Consists Intelligent Investing

Intelligent investing requires a thorough analysis of the company’s (that you’ll be investing in) fundamentals

Includes the competency to protect himself from or against severe losses

An intelligent investor must not anticipate extraordinary results therefore keeping expectations low but still aim for an adequate performance

The Rule of Opposite

 

The more enthusiastic investors and speculators become in the long run (of investing), the more certain they are to be proved wrong in the short run because the future of the market is unpredictable.

To be an intelligent investor means being humble, and composed, and should be able to expect the unexpected.

Individual Stocks

When investing in individual stocks, do make sure of these points:

People who invest make money for themselves; people who speculate make money for their brokers.

The Intelligent Investor vs The Spectator

The investor believes that the market price is judged based on the established standards of value while the spectator bases all their judgment on market price.

To distinguish whether you are an intelligent investor or a speculator ask yourself whether or not you would invest in a stock without seeing its chart.

In addition to that, the intelligent investor is not looking for quick gains but rather something long-term and sustainable regardless of the market’s volatility.

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