Benjamin Graham would easily be the most famous investor of the 20th century, if it weren’t for his student – Warren Buffett – likely the only person to surpass him in investing brilliance.
Coming from poverty he became an excellent student at Columbia and upon graduation started his investing career with a job on Wall Street. He wrote down his investing principles in 1949 inside The Intelligent Investor, which Warren Buffett calls the best book on investing ever written.
Here are 3 key lessons from Graham’s book to help you start investing:
- There are 3 principles to intelligent investing: analyze for the long term, protect yourself from losses, and don’t go for crazy profits.
- Never trust Mr. Market, he can be very irrational in the short and medium term.
- Stick to a strict formula by which you make all your investments, and you’ll do fine.
- Always create a margin of safety while buying any stock. Never buy a stock for more than two-third of its intrinsic value.
There are 9 principles for being a Defensive investor
- Divide your portfolio in 50:50 (at least 50% should be kept in cash or liquid assest)
- Diversify your portfolio.
- Invest in Large companies
- Conservatively financed i.e. Invest in companies having current ratio of 2:1
- Read about Dividend history of the company
- Read about Earning history of the company
- Invest in companies having growth of at least 3%
- Intrinsic value of the company should be at least 1.5 times.
- P/E ratio should be less than 15 times.
4 Qualities of an investor are:
- Eagerness to learn
- Lots of time
Qualities of an enterprise investor are:
- Going against the market.
- Divide your portfolio in 75:25 (instead of 50:50)
- Buying stock of companies having a good growth rate
- Buying stocks of companies which are traded at a lower price
- Buying special cases stocks.
You can buy the book from the link below.
Happy Reading 🙂