Key Points

  • Intelligent investors take their time to examine a company’s long-term value. They analyze the long-term development and look at the bigger picture.
  • Intelligent investors diversify their investments to protect themselves against losing everything at once. They play it steady and carefully. They buy only when an asset price is undervalued.
  • Crashes are inevitable so intelligent investors are prepared for high and low points both financially and mentally. They ensure they can take a hit and survive it as it will happen at one point or another.
  • Intelligent investors take the inflation rate into consideration. (If, for example, you calculate a 7% return on your investment within 1 year, but inflation is at 4%, you’ll only earn a return of 3%, this calculation might make you realize that this investment may not be worth the effort).
  • The market is a pendulum that forever swings between unsustainable optimism (which makes assets expensive) and unjustified pessimism (which makes them too cheap). 
  • With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles, but we cling tenaciously and unquestioningly to our prejudices. 
  • The intelligent investor doesn’t trust, nor follow, the crowd of investors or the market. Intelligent investors are realists who ignore Mr Market’s mood swings and resist the temptations he puts their way. 
  • A sound investment is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.
  • An intelligent investor is neither right or wrong because others agreed or disagreed with him; he is right because his facts and analysis are right. 
  • Intelligent investors know their personality and risk profile. (For example, if you’re more of a defensive investor, for example, then don’t overstretch yourself). 
  • Intelligent investors use “dollar-cost-averaging” strategy in order to mitigate the risks of higher volatility.
  • Intelligent investors thoroughly analyze an asset and the soundness of its fundamentals on an ongoing basis. They invest only if they would be comfortable owning an asset even if they had no way of knowing its daily price.
  • An intelligent investor does not panic as soon as there’s a drop in the market. He sells only when the fundamentals and the long-term view of the asset change. 
  • Those who do not remember the past are condemned to repeat it.
  • Intelligent investing isn’t about beating others at their game. It’s about controlling yourself at your own game.
  • A stock is not just a ticker symbol; it is an ownership in an actual business, with an underlying value that does not depend on its share price.
  • Some speculation is necessary and unavoidable. But there are many ways in which speculation may be unintelligent. Of these the foremost are: (1) speculating when you think you are investing; (2) risking more money in speculation than you can afford to lose.

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The above is inspired from the bestselling book “The Intelligent Investor” by Benjamin Graham

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