Timeless Lessons from Benjamin Graham That Could Be Your Ultimate Guide to Smart Investment


Are you looking out ways for smart investment?
Hop into this inspirational and informative ride with us.
Some great lessons from Benjamin Graham are a treat for a secure investment.
Acknowledged as the “father of value investing”, Benjamin Graham is among the most well-known economist and investors of the 20th century.
His name is floating around the globe.
To become a savvy and intelligent investor like himself, you definitely need to take a look at the important lessons from Benjamin Graham.
I believe his teachings are very crucial for you to yield fruitful results on your way to financial freedom.
This man is like a lord of investment.
Many of his notable disciples and students followed the unique Benjamin Graham formula on their road to peaceful future money-wise.
Success for sure bowed down to them with these great lessons!
To your joy, the great investor didn’t fail you.
He knew the world needed his wisdom and so this legendary man wrote two best-selling books on investment named “Security analysis” and the “Intelligent Investor”.
Pretty certain you are already familiar with these names!
According to Warren Buffet (his former student and colleague), the intelligent investor is “the best book ever written about investing.”
You definitely need to go through the Intelligent Investor key points for a better understanding of the whole game.
Curious enough about the great?
Let’s cut the wait and dive into them right away.
We will walk you through some of Graham’s important investment lessons, so you conveniently comprehend and understand everything without any trouble.

1. Keep a Reliability Margin

A keen investor is always smart about his choices and his profit.
He foresees the probability of profit and loss and acts accordingly.
Among the greatest lessons given by Benjamin Graham for primitive investors, to invest with reliability margin is of the utmost importance.
You have got to be clever to get ahead in the rat race.
Investment with a reliability margin specifies that one should always be vigilant about the values of assets.
Instead of buying an asset or security to its original value, you must try your maximum best to purchase it with a discount.
This will not only provide you with high-return opportunities but also save you from a great loss of downhill.
In simple words, according to Benjamin Graham’s formula, if a market price of a particular asset is $1, you should strive to purchase it in 50 cents for greater benefits.
If you purchase a certain asset with a discounted price rather than its intrinsic value than it is possible for you to save yourself from troubles the downhill brings.
For instance, purchasing a $1 asset by 50 cents will reduce the loss by the same amount.
If the market price of that particular assent decreases, you will face a loss of 50 cents rather than $1. Pretty smart, isn’t it?
This is among the most important lessons for investors to note so they could intelligently invest as suggested by Benjamin Graham.
Several of Graham’s students all agreed upon this incredible strategy.

2. Expect Inconsistency to Gain Profit

Always be conscious that when you are dealing with a market or working in the business world; you are dealing with inconsistency.
Nothing is truly ever stable in life and even more so in investments.
Like all the other aspects of life, career, relationships, even personal beliefs, the investment world also faces unpredictable turns and tosses.
A smart investor is never afraid of the volatility of the assets.
Rather he catches the chance and thinks of it as a road to better profit.
A smart investor knows that the market price of almost every asset goes up and down along the way.
Mostly, the investors withdraw their investments as soon as it goes downhill.
That’s the major difference between an “investor” and a “smart investor” according to Benjamin Graham.
Instead of running from the market crash, you should consider this crucial time as an opportunity.
Greet those downturns of the assets as a chance for you to find better investment options.
You should be cognizant of the point that if a market price of a particular asset is down now, at some point, it will rise back again.
Purchase the asset you are most certain of its probability to rise again when the price is low.
Once you buy it at a rather low price than usual, wait for its market price to go up to sale it.
This is a smart choice for you to gain profit from the inconsistency of a particular asset.
This great lesson from Benjamin Graham has helped several investors just not to spill their money but invest prudently.
As he quotes “The intelligent investor should recognize that market panics can create great prices for good companies and good prices for great companies”.
That is something to ponder over!
You can always look at some great options for investment when it seems most unlikely.

3. Be Mindful of Investment

For you to invest wisely, you should always have enough knowledge about the assets and investment vehicles you are opting for.
Mindful investment is a way for that.
Always be cautious about the market value, stay in touch with the stock market.
An intelligent investor never buys any share with a blind eye. Rather he scans through business portfolios and a company’s details.
The basket you are sure will provide you benefit in the future, put your eggs in that.
Certain companies show great potential for growth and productivity, while others may be undervalued at this point in time.
Take your time to analyze the trend and anticipate the projections.
Invest in the assets that will provide you with a benefit in the longer run.
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioural discipline that is likely to get you where you want to go.”
The famous Benjamin Graham prefers the formula investing. This is an investment technique where you have a certain formula or a plan to determine your investment policy so you could be smart about your choices.
Never just dive into anything without a plan in your hand!

4. Know Your Investment Temperament

Before diving into the crazy ride of whole financial growth, an investor should always know what kind of investor he is.
This is among the most critical lesson from Graham.
You can never really achieve something until you aren’t aware of your potential.
According to this famous personality, there are two kinds of investors, an “Active investor” or “passive investors”.
They are also known as “Enterprising investors” and “Defensive investors”.
An active investor is actively involved in the market.
There are buying and selling activities by this investor almost every day.
He believes in diversified investment and never just relies on one.
They are pretty much involved in the market and are updated with the price deviations of their stock many times a day. They mostly seek short-term investment
However, a passive investor goes for a long term investment and is very cautious about his assets.
He isn’t actively involved in the market; rather, he prefers to hold on to one particular asset for a longer period.
‘’Invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.’’
So, which one are you?
That’s the question you should ponder over.
If you are not very updated with the market condition, and the volatility of assets, then it is suitable for you to go for passive investment.
But always invest in the companies and fields you are familiar with.
As Passive investment is for the long run, look at the business documents and portfolios and invest in the companies, you are certain of will show growth and profit you.
But if you are very much into market scenarios, have well knowledge about the stocks and assets, and are keen to diversify your investment then you can opt for active investment as well.
Whatever you choose, always be sure about it.

5. Survive; Do Not Dodge the Risks

Among the bundle of the Intelligent Investor’s notes, this is my most favorite.
One should always be daring enough to take risks. You and I both know life is nothing without it.
Quoting Benjamin Graham “Successful investment is about managing risks, not avoiding it.”
For you to invest smartly, you must be aware of the risk.
As mentioned above, assets are volatile. There is a high possibility for your asset’s market price to go down at times.
You should not dodge the risks but learn to survive them, reduce them, and learn from them.
There are ways you can survive the risk such as, never rely on only one asset, and do a thorough analysis before investing.
If a particular company is only providing you with the loss, you can always cut them off.
Never just give up because of risks, play safely around them!

6. Consider Value Investing Whenever You Can

As mentioned above, Benjamin Graham is recognized around the world as a “Father of Value Investing”, and so there is no one like him to preach the lesson of value investing.
Value investing is a long term strategy that might benefit you if done in a proper away.
It is an investment strategy that involves investing in those companies or markets that aren’t currently on their well-established level but have the potential to grow.
Mostly new companies and programs are not recognized properly in a market, but over time they do grow.
Make your own priority list of what is important to you and if the company fundamentally meets your checklist, go for it.
Benjamin Graham has encouraged the value of investing throughout his teaching, and I am sure it is a suitable option for you to choose after taking a look at risks and loss.

The Crux

To become a successful and thriving investor, lessons from Benjamin Graham must be your ultimate guide along the way.
Investment isn’t a piece of cake, but with these incredible lessons, I am sure you will find it much easier.
Follow up on the great lessons from Benjamin Graham for a smart investment.
“The world isn’t for ordinary it is for smart.”

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ABOUT THE AUTHOR

Jun Sing Tan

I help young adults and working professionals achieve their financial goals with a full suite of risk management and wealth accumulation solutions. I firmly believe that financial education should be easy and achievable for all. I am committed to service and hope to be your one stop financial solution.

author

Jun Sing Tan

November 23, 2020

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