Overview
Hey buddies! Thank you very much for visiting my website. I have decided to start a separate section where I share my top takeaways from the best financial and stock market investment books I have read so far.
I am going to start with the most famous and prominent book on investing by far, The Intelligent Investor. It was written by the father of value investing and the legendary investor, Benjamin Graham. The best stock market investor of all time Warren Buffet stated: “by far the best book on investing ever written”.
I started my research on stock markets somewhere in 2017. I only lost money for the first two years. Since I invested in small amounts, the loss was manageable. But, I got fed up following mainstream media and intraday offers by stockbrokers. So I decided to start my research.
It is then I came across The Intelligent Investor. It completely changed the way I looked at investing. Till then, I was also the same person who thought investing was meant for professionals, and we had to follow their guidelines. It took me somewhere around two months to complete the book.
The Intelligent Investor was first published in 1949; I read the fourth edition, which was published in 1973. A lot has changed in stock markets since the 1970s. The paper shares certificates got converted to electronic shares now. But the teachings of Benjamin Graham proved fruitful 70 years ago. They are very well applicable now for making money in the stock market.
Here are the key takeaways from The Intelligent Investor.
- Know the difference between investment and speculation. In Ben’s words, “An investment is one which after thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative”. I have posted an article on Investment Vs Speculation.
- The investors have to follow strong policies involving fundamental approach. Do not follow what stock market experts suggest blindly.
- For all small and retail investors, 10% of overall wealth is the maximum permissible amount that could be used for speculating or gambling on stocks.
- Retail investors must stay away from Initial Public Offerings or IPOs.
- An intelligent investor should be able to resist the temptations of following stocks recommended by stockbrokers and financial media during the bull markets.
- Always search for the Bargain Issues which had recent disappointing results or subjected to negligence or unpopularity. These stocks are usually obtainable at their net asset value.
- A sincere investor will not believe that frequent day to day fluctuations in the stock prices make him richer or poorer.
- Always have a Margin of Safety for your investment. For some part of my portfolio, I choose the stocks that pay good dividends, say around 10% or more return on the investment. According to Ben, Dividends are the greatest force in stock investing.
- Stay away from the companies that make a lot of acquisitions. Reliance Anil Dhirubhai Ambani Group is the best example of such a company in India. It had filed for Bankruptcy in February 2019. You can Google it to find more information.
- You can benefit from the volatility of the stock prices if you understand the underlying value of the companies. Occasionally, I follow this strategy to trade stocks and make some money.
- Make sure to invest only in companies with strong balance sheets. You can find my article on choosing fundamentally strong companies.
These are the top takeaways from the book, “The Intelligent Investor”. I have not mentioned suggestions made on bonds and other fixed income securities. Nowadays, bonds are not that attractive and safe as they were during the 1970s.
Disclaimer
I provide the information and my views on the website only to educate new investors, stock market enthusiasts, and the common public on equity or stock market investments. Please consult your financial adviser before making any investments in the stock market. In case of any queries, you can contact me via email ID or Contact Form.
