Benjamin Graham is regarded as one of the most successful investors in history, and with these 5 tips from his book 'The Intelligent Investor' you could be too.
Graham’s famed book, The Intelligent Investor, is also aptly called the bible of value investing. The book is jam-packed full of ridiculously great investing quotes, but more importantly teaches value investing in a straightforward way. The mentor of Warren Buffet and Irving Kahn is now able to teach investing for beginners, and his genius is within our grasp.
That being said, not many people have the time to go grab a copy of Graham’s book and spend a couple week’s soaking up the wisdom inside. That’s why we’ve read it for you and streamlined all the most wonderful Benjamin Graham quotes into 5 tips for becoming the intelligent investor.
The Intelligent Investor: Benjamin Graham
5 Investing Tips for Beginners
1. Be Disciplined:
"Investing isn’t about beating others at their game. It's about controlling yourself at your own game.” (pg. 219)
“By developing your discipline and courage, you can refuse to let other people’s mood swings govern your financial destiny. In the end, how your investments behave is much less important than how you behave.” (pg. xiii)
Don’t react to the market, but rather to dedicated research, data and analysis. Focus on your investments, and let cold, hard facts sway your decisions, not rumour or panic.
2. Be Business-like:
“The sillier the market’s behaviour, the greater the opportunity for the business-like investor.” (pg. ix)
“The intelligent investor should recognise that market panics can create great prices for good companies and good prices for great companies.” (pg. 483)
“A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.” (pg. 371)
Investing is not an emotional undertaking. It’s analytical and unemotional, which is why it should be approached like any other business. You look for value where others don’t see it, and take advantage of that… without getting caught up in the panic of a bear market or the excitement of a bull market. Don’t find yourself making overconfident decisions.
3. Be Long:
“In the short run the market is a voting machine, but in the long run it is a weighing machine.” (pg. 477)
“Never buy a stock because it has gone up or sell one because it has gone down.” (pg. 206)
Every value investor knows one hard truth: the money is in the long game, not the short. You need to practice patience, understand what your long-term goals are, and stick to them. Never try to take short-cuts.
4. Be Minimal:
“Thousands of people have tried, and the evidence is clear: The more you trade, the less you keep.” (pg. 149)
“If fees consume more than 1% of your assets annually, you should probably shop for another adviser.” (pg. 277)
It’s simple: the more you trade, the more you pay. This means that if you don’t find yourself making only the most necessary trades, but rather trading wherever you think a quick buck might be made… well, you’ll be paying out of your ears. This ties into the previous 3 tips: know your long term goals and stick to them, making minimal trades with discipline and patience.
5. Be a Risk Manager:
“Successful investing is about managing risk, not avoiding it.” (pg. 535)
Being an investor is like being a rock climber. The risk is always there, no matter how hard you try to avoid it. That’s good to keep in the back of your mind, because forgetting it can make you become overconfident, or focusing solely on it can lead you to make rash decisions. A good value investor understands the risk open to him/her, and diversifies their portfolio to protect themselves as best they can against it. If one investment falls flat, you should have a diversified portfolio so that another investment can save you.
There's a lot more behind these 5 steps, of course. If you'd like to be guided through building your portfolio, just download our Practical Guide to Value Investing: Building Your Portfolio below.