The investor believes that the market price is judged based on the established standards of value while the spectator 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 on a stock without seeing its chart.
In addition to that, the intelligent investor is not looking for quick gains but rather something long-term and sustainable regardless of the market's volatilty.
MORE IDEAS FROM THE BOOK
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.
“People who invest make money for themselves; people who speculate make money for their brokers.
In Benjamin Graham's book, he defines two types of investors based on the aggressiveness of their portfolios:
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:
Before investing your capital:
The stock investor is neither right or wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.
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.
"The investing business is not the same as investing in a business"
Forces that are not related to day-to-day business that can affect the price of stock:
Inefficiency is a necessary condition for superior investing. Attempting to outperform in a perfectly efficient market is like flipping a fair coin: the best you can hope for is fifty-fifty. For investors to get an edge, there have to be inefficiencies in the underlying process - imperfections, mispricings-to take advantage of.
Investing is not magic. Remember that ...
If you can stick around long enough and keep learning, you will be successful at this game. Learn the basics and practice.
❤️ Brainstash Inc.