Investing is most intelligent when it is most businesslike – Ben Graham
The.com bubble inspired me to search for an investment strategy that makes sense and could easily be integrated into my hectic lifestyle. After a brief period looking at price charts, I Googled and re Googled phrases like ‘best investment strategy’, ‘best investment books’ and ‘best investors’.
Many hours of reading and beard scratching (and sometimes both at the same time), I ended up choosing value investing and The Intelligent Investor would be the bedrock upon which my investment approach would be formulated.
I think I’ve mentioned before that it’s a good book 🙂
I can’t tell you how much has been written about ‘simple investing strategies’ over the years – all I know is that most of it is drivel.
Today’s post will fix that.
To start off, we’ll look at 2 reasons why you must position yourself as an intelligent value orientated investor. Next we’ll look at a short 5 minute video that describes the best way to make that happen.
Why Position Yourself As An Intelligent Investor?
In thinking about stocks and the opportunities that the stock market can provide your focus should be making intelligent financial decisions that you will profit from. It’s human nature to want to make money from the stock market. Why would you want to lose? There is a great sense of satisfaction by profiting from stock market participants who are selling whilst you are buying.
Lets take a closer look
1. Most stock market participants underperform the market or simply lose money
Hard-working, conscientious savers place their trust into a mutual funds or their pension that they’ve been told is safe and will look after them in retirement. Figures vary but the average annual returns from pensions in the UK swings from between 1% and I’ve seen it quoted as high as 7%. The fact the there is disagreement between rates of return is annoying to say the least but it’s not as though we have not been warned about the pensions crises facing Britain.
This phenomenon is not confined to the UK – Western developed capitalist societies are suffering a social security crises.
2. Most people feel powerless to change their financial future
This is just plain wrong.
When you think that the real rate of inflation (not the government figures you see quoted in the mainstream press) has probably been running at 7%, most people have been losing money from their pensions. This is clearly not intelligent investing and a wake up call for those who do not want to have to rely on the state for their retirement.
Private investors can take advantage of tax free investing and combine it with a value orientated approach to stock selection. Such an intelligent strategy over the long term will, if you stick to the rules, change your financial future for the better.
The alternative is to rely on the state to look after you which given the current economic mess, most notably the devaluation of cash, is simply not intelligent.
Now you know why intelligent investing is important, lets take a look at the one thing you can do today to become an intelligent investor.
How To Position Yourself As An Intelligent Investor
Some people want others to do it for them but unfortunately no one is going to hand you a pill with ‘intelligent investor’ on it that you can drink with a glass of water, preferably after your next meal.
It is up to you.
By understanding the basic principles of intelligent (value) investing and using them on a daily basis, you can position yourself as an intelligent Investor.
Here is a 5 minute video from Professor Greenwald who explains the core elements of value investing and why it’s important to stay away from what the crowd is doing.
There it is. A few tips to get you started.
To make money in stocks you need a sound basis from which to frame your investment approach. Intelligent investing as designed by Benjamin Graham and taught by Professor Bruce Greenwald can improve your investing when you understand the principles and stick to them over the long term. Doing it this way means that you will not have to rely on the state in retirement if you start early enough and maintain a value orientated approach to stock selection.
If you enjoyed reading this post, you may also like these about the core principles of value investing:
- Testing Benjamin Graham; First Quarter Results 2013
- 3 More Actions You Can Take To Become An Awesome Value Investor
- Value Investing; A Circle Of Competence
- 3 Basic Things You Need To Know About Value Investing
- Give Me 3 Minutes And I’ll Make You A BETTER Investor
- See How Easily You Can Analyse UK Companies
- How To Value A Company; The Lazy Investors Guide