Thursday, February 03, 2005
Are you an Intelligent Investor?
It's difficult to distinguish an intelligent investor from a confident investor and a lucky investor from a good one. A lucky investor can easily outperform a better investor over short periods and an investor's confidence may arise from his successes, rather than knowledge and competence.
Ben Graham's investment classic The Intelligent Investor (Amazon, £14.43) is a tour de force of investment experience, theory and reason. I blazed through the book's three hundred pages in less than a week, nodding along in agreement at Mr Graham's insightful and erudite observations and philosophy. This book helped mould my strategy to its current form and in today's blog I'd like to share some of the wise words of The Intelligent Investor. I hope this book will make you and I both intelligent and successful stock-market investors.
The Intelligent Investor begins with some words from Warren Buffett, the world's second richest man and probably the planet's most successful investor, ever. Buffett's preface contains one of his oft-quoted comments on the subject:
To invest successfully over a lifetime does not require a stratopheric IQ, unusual business insights or insider information. What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly describes the proper framework. You must supply the emotional discipline.
I've often blogged on the need to take emotion out of investment decisions, particularly here.
The introduction reads like a giant warning sign posted along a byway in the boondocks: All ye speculators: turn back now...
The extent of the market's shrinkage in 1969-70 should have served to dispel an illusion that had been gaining ground during the past two decades. This was that leading common stocks could be bought at any time and at any price, with the assurance not only of ultimate profit but also that any intervening loss would soon be recouped by a renewed advance of the market.. the market had "returned to normal", .. both speculators and investors must again be prepared to experience significant and perhaps protracted falls as well as rises in the value of their holdings
and continues in a similar vein on the approach to investing and investor psychology:
the investor's chief problem - and even his worst enemy - is likely to be himself. ("The fault, dear investor, is not in out stars - and not in our stocks - but in ourselves...") This has proved the more true over recent decades as it has become more necessary for conservative investors to acquire common stocks and this to expose themselves, will-nilly, to the excitement and the temptations of the stock market... we hope to aid our reader to establish the proper mental and emotional attitudes toward their investment decisions. We have seen much more money made and kept by "ordinary people" who were temperamentally well suited for the investment process than by those who lacked this quality, even though they had an extensive knowledge of finance, accounting, and stock-market lore.
I've added a permanent link to Amazon book store and can assure all readers that the profits I've enjoyed since heeding the advice of The Intelligent Investor have significantly outstripped the cover price. If you'd like help deciding if I qualify for the title intelligent investor, keep on reading.
The Artful Dodger
Ben Graham's investment classic The Intelligent Investor (Amazon, £14.43) is a tour de force of investment experience, theory and reason. I blazed through the book's three hundred pages in less than a week, nodding along in agreement at Mr Graham's insightful and erudite observations and philosophy. This book helped mould my strategy to its current form and in today's blog I'd like to share some of the wise words of The Intelligent Investor. I hope this book will make you and I both intelligent and successful stock-market investors.
The Intelligent Investor begins with some words from Warren Buffett, the world's second richest man and probably the planet's most successful investor, ever. Buffett's preface contains one of his oft-quoted comments on the subject:
To invest successfully over a lifetime does not require a stratopheric IQ, unusual business insights or insider information. What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly describes the proper framework. You must supply the emotional discipline.
I've often blogged on the need to take emotion out of investment decisions, particularly here.
The introduction reads like a giant warning sign posted along a byway in the boondocks: All ye speculators: turn back now...
The extent of the market's shrinkage in 1969-70 should have served to dispel an illusion that had been gaining ground during the past two decades. This was that leading common stocks could be bought at any time and at any price, with the assurance not only of ultimate profit but also that any intervening loss would soon be recouped by a renewed advance of the market.. the market had "returned to normal", .. both speculators and investors must again be prepared to experience significant and perhaps protracted falls as well as rises in the value of their holdings
and continues in a similar vein on the approach to investing and investor psychology:
the investor's chief problem - and even his worst enemy - is likely to be himself. ("The fault, dear investor, is not in out stars - and not in our stocks - but in ourselves...") This has proved the more true over recent decades as it has become more necessary for conservative investors to acquire common stocks and this to expose themselves, will-nilly, to the excitement and the temptations of the stock market... we hope to aid our reader to establish the proper mental and emotional attitudes toward their investment decisions. We have seen much more money made and kept by "ordinary people" who were temperamentally well suited for the investment process than by those who lacked this quality, even though they had an extensive knowledge of finance, accounting, and stock-market lore.
I've added a permanent link to Amazon book store and can assure all readers that the profits I've enjoyed since heeding the advice of The Intelligent Investor have significantly outstripped the cover price. If you'd like help deciding if I qualify for the title intelligent investor, keep on reading.
The Artful Dodger
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