The originator of value investing, Benjamin Graham, wrote the timeless classic "The Intelligent Investor." Since its 1949 release, the book has grown to be a valuable resource for investors trying to make their way through the erratic world of the stock market. Generations of investors have been influenced by Graham's ideas and observations, which are summarized in this book and are thought to be the cornerstone of effective investing techniques.
The difference between speculation and investing is "The Intelligent Investor’s main point of contention. According to Graham, a wise investor approaches the market from a long-term viewpoint, concentrating on the intrinsic worth of stocks rather than giving in to speculation or transient market swings. To address the differing risk tolerances and time commitments of individuals, he presents the notions of the "enterprising investor" and the "defensive investor."
1. The Defensive Investor: According to Graham, a defensive investor is one who places more emphasis on capital preservation than aggressive capital growth. This kind of investor looks for steady, predictable returns and is typically risk averse. Graham suggests a diversified portfolio that is made up of bonds as well as equities in order to offer a risk-return balance. He advises defensive investors to concentrate on well-established, financially stable businesses with a track record of reliable dividend payments and stresses the significance of conducting in-depth research and analysis prior to making investment decisions.
2. The Resourceful Investor: Conversely, the enterprising investor is prepared to dedicate more time and energy to their investment strategy. Graham concedes that certain people might possess the aptitude and disposition to participate in a more active investment approach. To reduce risks, he does stress the importance of having a margin of safety, or purchasing shares below their true value. It is recommended that entrepreneurial investors look for cheap companies, perform in-depth research, and actively manage their portfolio to take advantage of inefficiencies in the market.
3. Safety Margin: The idea of a margin of safety is one of Graham's main ideas. This is purchasing stocks at a discount to their true worth in order to act as a safety net against unanticipated market declines or problems pertaining to the company. Graham counsels investors to base their investment decisions on a careful examination of a company's financial health and to be cautious in their projections of future profitability.
4. Market Volatility: Graham talks about the emotional difficulties that investors face as a result of market swings, which are inevitable. He advises investors to see changes in the market as opportunities rather than dangers. The wise investor resists the need to respond emotionally to momentary market swings by remaining steady and logical. By doing this, investors can profit from price difference
