2/7/2018 0 Comments CHapter 1In this first Chapter of The Intelligent Investor, Benjamin Graham first sets out to examine the differences between investors and speculators. During this time (the early 1970s), Wall Street began to erase the distinction between these two groups, ultimately leading investors to believe that investing in the stock market was risky and purely speculative. Graham states that while investors make sound and profitable decisions through thorough research, speculators are driven by their own bias, which causes inaccurate valuations. The fact that most of the market is made up of speculators creates large market swings, which investors can then take advantage of and wait for the price to return to its intrinsic value.
Distinguishing yourself from speculators, however, is only half of the battle. To effectively be a profitable investor, you must overcome the obstacles of human fallibility and the inherent competition that exists in investing. Human fallibility is one of the largest problems that investors face. If you find a strategy that is reliably profitable for you, chances are that another investor has already found and used that strategy before (the same also applies to undervalued companies). Therefore, intelligent investors must choose companies that are unpopular in the larger market. The second obstacle, the nature of competition, deals with the difficulty in accurately projecting things like growth and interest rates. This especially applies when making long-term investment decisions, when predicting these rates becomes more difficult. Because of this obstacle, research and sound logic are required when making investments. Finally, to be a successful value investor, one must avoid trading along the market, making investments based off of earnings reports, and hopeful predictions of the future.
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Synopsis (Taken from Goodreads)The greatest investment advisor of the twentieth century, Benjamin Graham taught and inspired people worldwide. Graham's philosophy of "value investing" -- which shields investors from substantial error and teaches them to develop long-term strategies -- has made The Intelligent Investor the stock market bible ever since its original publication in 1949. ArchivesCategories |