Juliana L.'s Key Ideas from The Intelligent Investor, Rev. Ed
by Benjamin Graham

The investor believes that the market price is judged based on the established standards of value, while the speculator bases all their judgment on market price.

To distinguish whether you are the intelligent investor or a speculator, ask yourself whether or not you would invest in a stock without seeing its chart.

Additionally, the intelligent investor is not looking for quick gains but rather something long-term and sustainable regardless of the market's volatility.

Benjamin Graham stated that the more enthusiastic investors and speculators become in the long run (of investing), the more certain they are to be proved wrong in the short run because the future of the market is unpredictable.

To be an intelligent investor means to be humble, composed, and that they should be abe to expect the unexpected.

In Benjamin Graham's book, he defines two types of investors based on the aggressiveness of their portfolios:

1. The active / enterprising investor; and
2. The passive / defensive investor

The former requires continuous researching of stocks, bonds, and mutual funds and this type of investor exerts much time and energy, while the latter has a fixed portfolio that runs autonomously regardless of the situation.

If you plan to become an investor, pick the type that best suits your personality to ensure the longevity of the approach.

Once you have your capital, invest 50% of it into bonds or an index fund (depending on market conditions) while the other 50% to be invested on individual stocks.

However, when investing on individual stocks make sure of the ff:

• avoid small cap stocks unless they're diversified
• current assets should at least double current liabilities
• stock earnings show stability over the previous 10 years
• look for companies that have a history of paying dividends
• PE (price earnings) ratio must be no more than 15 over the previous 3 years; and
• if their book ratio is less than 22.5, it's reasonably priced

Before investing your capital:

• make sure that their current ratio is below 1.5
• debt must be no more than 110% of working capital
• current earnings per share must be greater than their earnings per share (EPS) from 5 years ago
• they must pay a current dividend regardless of the amount
• their price to book must be less than 1.2; and
• the PE (price earnings) ration must be less than 10

This is a principle of investing wherein an investor purchases securities only when their market price is significantly below their intrinsic value.

The formula to determine the intrinsic value of something is:

Margin of Safety = Market Cap / Deep Value Bargain Investing

Remember, the market swings wildly from day to day and presents large changes in valuation over periods of euphoria and pessimism.