Have you ever thought about investing in the
stock market?
Well today we are going over the book “The
Intelligent Investor” by Benjamin Graham.
Warren Buffett said that this is the best
book ever written about investing.
Buffett read this book when he was 19, went
to Columbia University and Benjamin became
his teacher.
So if the richest man on the planet says that
a book is a great read, I think it’s worth
investing your time in the book.
(get it investing your time?)
First you need to understand what investing
actually is.
All you need to know to get started is that
there are three big types of investments called
asset classes.
And they are: Stocks, Bonds and Cash.
Stock is just ownership in a company, and
there are 2 ways to make or lose money in
the stock market.
You see when you own a stock, you actually
own a piece of a company.
And as the value of that company increases,
the stock price goes up.
But If the value of the company decreases,
the stock price goes down as well.
These ups and downs determine the amount of
profit or loss.
The second way to make money is when the company
shares its yearly profit with you in the form
of dividend.
Stock prices can go up and down dramatically
for all kinds of reasons as a result stocks
are the riskiest types of investments in your
However, there is a way to invest in the market
that doesn’t leave you at risk of losing
everything: Intelligent Investing.
There is a lot of money to be made through
But also a lot to lose.
Finance history is full of stories of investors
like Warren Buffett, who, by investing in
the right companies, earned vast amounts of
money in return.
And there are just as many — if not more
— stories of misfortune, in which people
place the wrong bets and end up losing it
There are three principles that apply to all
intelligent investors:
First, intelligent investors analyze the long-term
development and business principles of the
companies in which they’re considering investing
before buying any stock.
A stock’s long-term value is not arbitrary.
Rather, it depends directly on how well the
company behind it performs.
So, be sure to examine the company’s financial
structure, the quality of its management and
whether it pays steady dividends.
Intelligent investors use thorough analyses
in order to secure safe and steady returns.
This is very different from speculating, in
which investors focus on short-term gains
made possible by market fluctuations.
Speculations are thus very risky, simply because
nobody can predict the future.
For example, a speculator might hear a rumor
that Apple will soon release a new hit product,
and would then be motivated to buy lots of
Apple stocks.
If he’s lucky, then this knowledge will
pay off and he’ll make money.
If he’s unlucky and the rumor proves wrong,
then he stands to lose a lot.
In contrast, intelligent investors focus on
These investors buy stock only when its price
is below its intrinsic value.
Don’t fall into the trap of only looking
at short-term earnings.
Look instead at the big picture by examining
the company’s financial history.
These steps will give you a better idea of
how well a company performs independent of
its value on the market.
For instance, a company that isn’t currently
popular (and therefore has low share price)
but shows promising records, i.e., has earned
consistent profits, is likely undervalued,
and would thus make a prudent investment.
Second, intelligent investors protect themselves
against serious losses by diversifying their
Never put all your money on one stock, no
matter how promising it appears!
Just imagine the horror you would feel if
the promising company that you poured all
your investments into shows up in the news
for a tax fraud scandal.
Your investment will lose its value immediately,
and all that time and money will be lost forever.
By diversifying, you ensure that you won’t
lose everything at once.
And to further remove you from the emotional
stress of investing with the market, you should
always stick to a strict formula when investing.
Graham calls it formula investing, but it’s
more widely known as dollar cost averaging.
What it means is that you simply set a fixed
budget you’re going to invest every month
or quarter, and then invest that into the
stocks you’ve previously picked – no matter
the price.
Third, intelligent investors understand that
they won’t pull in extraordinary profits,
but safe and steady revenues.
The target for the intelligent investor is
to meet his personal needs, not to outperform
the professional stockbrokers on Wall Street.
We can’t do better than those who trade
for a living, and we shouldn’t be aiming
for fast money anyway; chasing dollar signs
only makes us greedy and careless.
Whether you are just starting out, or you’ve
been investing for quite some time you always
want to walk the path of the Intelligent Investor.
Maybe you won’t become a billionaire in a
week but I guarantee you too can turn your
investments into modest — but steady — profits.


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