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The Secrets of the Intelligent Investor

Aktualisiert: 24. Aug. 2023



Are you looking for a solid and proven investment strategy? Then you've come to the right place.


In this blog article, I will introduce you to the basic concepts from the book "The Intelligent Investor" by Benjamin Graham. It is important that you not only internalize the theory, but also put it into practice in order to benefit from the advantages of intelligent investing in the long run.


Let's dive into the exciting world of value investing together!

1. The difference between investment and speculation:

First of all, you should understand the difference between investment and speculation. Investment is based on a thorough analysis that leads to a rational assessment of the value of a stock. Speculation, on the other hand, is when you invest based on hopes, rumors or trends without really knowing the underlying value of a stock. As an intelligent investor, you should always be careful not to fall into the speculation trap and only trade on the basis of solid analysis and facts.


2. The Margin of Safety:

The central concept of Graham's investment philosophy is the margin of safety. It represents the difference between the market price of a stock and its intrinsic value. As an intelligent investor, you should look for companies whose stock is trading at a price significantly below its true value. The margin of safety serves as a buffer and protects you from possible losses if the market or the company experiences unexpected difficulties.


3. Mr. Market:

Graham uses the metaphor of "Mr. Market" to illustrate the capriciousness of the stock market. Think of Mr. Market as an emotional business partner who is ready to sell you his shares or buy your shares every day. Some days Mr. Market is euphoric and demands very high prices, other days he is depressed and offers you his shares at knockdown prices. As an intelligent investor, you should not blindly follow Mr. Market, but take advantage of the irrational fluctuations to buy shares cheaply or sell overpriced shares.


4. The distinction between investor and entrepreneur:

Graham distinguishes between two types of investors: the "defensive" (passive) investor and the "entrepreneurial" (active) investor. The defensive investor focuses on the safety of his capital and expects a reasonable return without investing too much time and effort in managing his portfolio. The entrepreneurial investor, on the other hand, is willing to put more time and effort into analyzing companies and their stocks in order to achieve above-average returns. Both approaches are fine as long as you stay consistent in your strategy.

5. Diversification:

An important rule for every investor is diversification. This means that you split your money into different asset classes and companies to reduce risk. Even if you are very confident in one stock, you should never invest all your assets in one company. By diversifying your investments, you can limit your potential losses while benefiting from different growth opportunities.


6. The importance of dividends:

Dividends are an important factor in long-term investment success. Benjamin Graham recommends that as an intelligent investor, you look for companies that have a stable dividend history and a reasonable dividend yield. Dividends signal a company's financial health and show that it is able to distribute profits to its shareholders. In addition, dividends can help stabilize your portfolio during volatile market periods and generate steady income over the long term.


7. Patience and discipline: Successful investing requires patience and discipline. Not only do you need to make the right investment decisions, but you also need to have the courage to stick with your strategy even when the market fluctuates or other investors disagree. Don't get distracted by short-term market movements or emotional decisions. Instead, focus on the long-term performance of your portfolio and the quality of the companies you invest in.

8. The use of valuation ratios:

To determine the true value of a stock, you need to use various valuation ratios. These include the price-to-earnings ratio (P/E), the price-to-book ratio (P/B) and the dividend yield. These ratios give you an indication of whether a stock is undervalued or overvalued and help you make informed investment decisions.

9. The importance of quality:

Benjamin Graham places great importance on the quality of the companies you invest in. Look for companies with strong balance sheets, good management and a sustainable competitive position. Make sure the company is profitable over the long term and does not have excessive debt. Don't invest in stocks of companies you don't understand or whose business model you consider questionable.


10. The role of the investment advisor:

A good investment advisor can be of great benefit to the intelligent investor. He can help you choose the right stocks, diversify your portfolio and help you achieve your investment goals. However, you should be careful to choose an independent and competent advisor who represents your interests and is not just out for commissions.


Conclusion:

Benjamin Graham's principles of smart investing are timeless and are still considered a solid foundation for long-term investment success. By understanding and applying these concepts, you can set yourself on the path to becoming an intelligent investor, building your wealth sustainably and achieving financial security.


By understanding the difference between investing and speculating, adhering to the margin of safety, using Mr. Market, setting your investment strategy, diversifying, paying attention to dividends, maintaining patience and discipline, applying valuation metrics, paying attention to the quality of companies, and consulting a competent investment advisor when necessary, you will lay the foundation for a successful investment portfolio.


It is important that you always act rationally and independently and do not let yourself be influenced by emotions or short-term market movements. Learn from Benjamin Graham and become an intelligent investor who profits from the opportunities of the stock market in the long term.


Click here for the book: The Intelligent Investor


Are you ready to write your own success story? Get a copy of my book now:



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