Title: The Intelligent Investor
Warren Buffett is a household name. But his mentor, Benjamin Graham, was equally if not more brilliant, yet has a much quieter reputation. In this book you get an insider, pun intended, look at what mental models laid the foundation for Graham’s empire, paving the way for Buffett’s success.
To those without a finance background, you’ll be delighted that the insight here is not only intelligent but it is also of the caliber that the layman, if focused, can understand and apply.
Graham’s core principles
- A stock is more than a ticker. It’s an actual business with underlying value that does not depend on it’s share price.
- The market is a pendulum forever swinging between overly optimistic (over priced) and unjustified pessimism (under priced).
- Future value of an investment is a function of its present price. The higher the price paid today the lower the future value will be.
- Every investor risks being wrong. However never overpaying, no matter how exciting an investment seems, is key to minimizing the odds of error.
- A critical thinker takes no “Wall Street fact” on faith.
The investor’s chief problem, and worst enemy, is likely himself “The fault, dear investor, is not in our stars and not in our stocks – but in ourselves.”
While enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.
With every new wave of optimism or pessimism we are ready to abandon history and time tested principles but we cling tenaciously and unquestionably to our prejudices.
Passive investing takes little time or effort, but requires complete detachment from the alluring hullabaloo of the market. It’s emotionally demanding.