Links: On-Hold List
The Intelligent Investor
Introduction
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Success in the stock market is largely dependent on our choices and our character rather than the stocks themselves.
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An average joe with a strong mentality can outperform a businessman who is well versed in finances and stocks
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To be a successful investor, one must create a sound and logical plan and stick to it and ensure that such plans are not affected by emotionally-driven irrational decisions.
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One will find more success investing in well-known and stable companies rather than banking on the growth of smaller, more unstable companies.
Three Powerful Lessons
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Instead of trying to beat the stock market (which is impossible), we can learn how to
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Minimize chances of irreversible loss
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Maximize chances of sustainable profits
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Control a self-defeating behavior? (hmm)
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Graham considers an intelligent investor to be one who is patient, disciplined, eager to learn, has self-control over their emotions, and is able to think for themselves.
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Listening to others and following the crowd instead of thinking for yourself can lead you to failure
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An investor’s biggest enemy is themselves (?)
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The physical growth of a company does not always correlate with the stock growth of a company
Chapter 1
- An intelligent speculator and an intelligent investor are two completely different things
Defensive Investor
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Puts majority of his investments into large-cap companies with a history of successful returns and growth
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Partakes in dollar cost averaging monthly to capitalize on low points of stocks
Aggressive Investor
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Day trades and plays the market (buys at dips and sells at high-points)
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Puts focus on growth stocks that seem promising of financial and developmental potential
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Invests in companies that may not be doing too well at the moment, but will be in the long future (technology, drugs) that have potential for extreme innovation and revolutionization
To achieve better results than other investors, it is important to follow inherently sound and promising policies which are not popular on Wall Street.
Graham believes that proper investing entails:
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Thorough analysis of companies before purchasing stock
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Protecting yourself from immense losses
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Only strive for adequate returns, rather than extraordinary returns
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One should be so confident in their stock choices to the point where they could never see the daily price and still be confident in their choices
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Speculation is fun and rewarding, but it is the worst way to build one’s wealth
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An intelligent investor does not care whether they exceeded averages in a certain time frame; they are more focused on the sustainability and reliability of their investments
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Some investment strategies, no matter how ridiculous, can work based off of luck alone (The Foolish Four)
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Even if a strategy were to successfully work, by publicizing it to the general public, the return rates would significantly decrease
Thoughts on Speculation
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Never mistake speculating with investing
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Don’t take speculating seriously
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Put a set limit on what you are willing to put into speculations (10%)
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To separate ideas of speculation with investing, have one account for speculative stocks and one account for strictly investments
Chapter 2- Inflation
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Nothing too useful for me
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Invest 10% of your money in bonds for a long-term investment that is safe from inflation
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