The Intelligent Investor- Summary

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The intelligent investor- Summary

The Intelligent Investor- Summary
Intelligent Investor- Summary
This book is known as investing bible. It was written by the mentor of Warren Buffett (the greatest investor of all time), Benjamin Graham.
  • ·       Be a defensive investor: Don’t go too aggressively in the market i.e. don’t invest in the market for great returns in a small period of time rather go for consistent returns. And only try to put that much money in the market that you would not need in near future(exceptions are always there).
  • ·       The concept of Mr. Market: He says that stock market is very irrational/emotional sometimes and some stocks trade at way low or way high prices than the actual value of the stock. So try to get stocks that are near/below its actual price. This concept is also known as Value Investing.
  • ·       Diversification of Portfolio: He says maintain 50-50 ratio between Stocks and Bonds. If any 1 of the side increases shift that much amount that will again make it 50-50 i.e. if u have Rs.1000 portfolio 500 in stocks and 500 in bond and if in matter of time stock valuation increases to 600 and bonds constant at 500 than take out Rs.50 from stocks and invest it in bonds. He also says don’t invest total money in 1 stock diversify it to around 10-30 companies.
  • ·       Go with large companies: As these companies have monopoly in the market.
  • ·       Conservatively Financed: Go with the companies whose assets are way higher (for ease 2times) than than its liabilities.
  • ·      Dividend History must be good so that you earn even if you don’t exit from the company and it also shows that the company is making good profit.
  • ·       Earnings must be increasing if not than atleast there is no deficit. As it shows companies profitability.
  • ·       Growth Rate of the company must be good. You can check this with expected growth rate. He says it should be around 3%.
  • ·       Cheap asset i.e. stocks whose price is less than 1.5 times value of the company and along with this profit must increase.
  • ·       PE ratio must be less or near 15.
  • ·       Enterprising Investment: it require a lot of time but if you can give this much time to analysis of stocks than you can deny many of the above mentioned points. For this u need to have a good grasp ant balance sheets, cash flow, operating profits. It requires discipline, patience, eagerness and a lot of time.
  • ·       Buy when market is in fear or too pessimistic and sell when market is greedy or too optimistic.
  • ·       If you are enterprising investor you can buy growth stocks.
  • ·       Margin of safety: It is more like value investing it basically means buy stocks at bargain i.e. if a stock values at 100 than try to buy it at 90 or less.
You can also focus on Warren Buffett’s saying that buy a stock that you can hold forever and which business u understand.


You can check as many fundamental indicators as you want on Screener (not promotional just my point of view).

 

The Intelligent Investor- Summary

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