“The Intelligent Investor”
Intelligent Investor by Benjamin Graham is one of the most famous books on investing. Though it was originally published years ago, the core principles and guidelines are still relevant.
Some of the principles described in the book may not be relevant in the context of techniques like momentum investing. For instance, as of today, only a few companies will pass the P/E ratio guidelines as described in the book. However, their stocks can still be purchased and sold for profits (short-term and long-term) following momentum investing techniques.
Nevertheless, here are some key points that one can infer from the book
1. When buying a stock consider if you would like to buy a part, howsoever small, of that business.
2. Assess the future value of a business to ascertain if the investment will turn out good in future. Amazon has been making a loss in the e-commerce domain but the stock is prized based on its future value.
3. Never overpay no matter how exciting is the investment. The stock will eventually come to its correct value in the long term.
4. Take emotions out of investing. Emotional decisions will make you go with news or the crowd which might not be correct. Rule-based investing is what works very well in the long term. You have to come up with a set of rules that works for you.
Core Investor Guidelines:
Here are some of the core guidelines for investors that can be inferred from the book
1. Stop Loss is important. Do not allow for a loss above a threshold percentage.
2. Do not invest without proper understanding or just because others are doing it
3. No emotions, follow disciplined rule-based approach
