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INVESTING IN STOCKS FOR BEGINNERS - THE INTELLIGENT INVESTOR BY BENJAMIN GRAHAM ANIMATED BOOK REVIEW - YouTube
Channel: Project Better Self
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Have you ever thought about investing in the
stock market?
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Well today we are going over the book "The
Intelligent Investor" by Benjamin Graham.
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Warren Buffett said that this is the best
book ever written about investing.
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Buffett read this book when he was 19, went
to Columbia University and Benjamin became
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his teacher.
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So if the richest man on the planet says that
a book is a great read, I think it's worth
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investing your time in the book.
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(get it investing your time?)
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Okay..
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First you need to understand what investing
actually is.
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All you need to know to get started is that
there are three big types of investments called
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asset classes.
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And they are: Stocks, Bonds and Cash.
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Stock is just ownership in a company, and
there are 2 ways to make or lose money in
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the stock market.
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You see when you own a stock, you actually
own a piece of a company.
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And as the value of that company increases,
the stock price goes up.
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But If the value of the company decreases,
the stock price goes down as well.
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These ups and downs determine the amount of
profit or loss.
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The second way to make money is when the company
shares its yearly profit with you in the form
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of dividend.
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Stock prices can go up and down dramatically
for all kinds of reasons as a result stocks
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are the riskiest types of investments in your
plan.
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However, there is a way to invest in the market
that doesn’t leave you at risk of losing
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everything: Intelligent Investing.
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There is a lot of money to be made through
investing.
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But also a lot to lose.
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Finance history is full of stories of investors
like Warren Buffett, who, by investing in
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the right companies, earned vast amounts of
money in return.
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And there are just as many — if not more
— stories of misfortune, in which people
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place the wrong bets and end up losing it
all.
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There are three principles that apply to all
intelligent investors:
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First, intelligent investors analyze the long-term
development and business principles of the
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companies in which they’re considering investing
before buying any stock.
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A stock’s long-term value is not arbitrary.
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Rather, it depends directly on how well the
company behind it performs.
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So, be sure to examine the company’s financial
structure, the quality of its management and
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whether it pays steady dividends.
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Intelligent investors use thorough analyses
in order to secure safe and steady returns.
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This is very different from speculating, in
which investors focus on short-term gains
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made possible by market fluctuations.
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Speculations are thus very risky, simply because
nobody can predict the future.
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For example, a speculator might hear a rumor
that Apple will soon release a new hit product,
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and would then be motivated to buy lots of
Apple stocks.
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If he’s lucky, then this knowledge will
pay off and he’ll make money.
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If he’s unlucky and the rumor proves wrong,
then he stands to lose a lot.
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In contrast, intelligent investors focus on
pricing.
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These investors buy stock only when its price
is below its intrinsic value.
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Don’t fall into the trap of only looking
at short-term earnings.
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Look instead at the big picture by examining
the company’s financial history.
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These steps will give you a better idea of
how well a company performs independent of
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its value on the market.
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For instance, a company that isn’t currently
popular (and therefore has low share price)
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but shows promising records, i.e., has earned
consistent profits, is likely undervalued,
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and would thus make a prudent investment.
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Second, intelligent investors protect themselves
against serious losses by diversifying their
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investments.
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Never put all your money on one stock, no
matter how promising it appears!
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Just imagine the horror you would feel if
the promising company that you poured all
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your investments into shows up in the news
for a tax fraud scandal.
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Your investment will lose its value immediately,
and all that time and money will be lost forever.
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By diversifying, you ensure that you won’t
lose everything at once.
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And to further remove you from the emotional
stress of investing with the market, you should
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always stick to a strict formula when investing.
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Graham calls it formula investing, but it’s
more widely known as dollar cost averaging.
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What it means is that you simply set a fixed
budget you’re going to invest every month
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or quarter, and then invest that into the
stocks you’ve previously picked – no matter
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the price.
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Third, intelligent investors understand that
they won’t pull in extraordinary profits,
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but safe and steady revenues.
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The target for the intelligent investor is
to meet his personal needs, not to outperform
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the professional stockbrokers on Wall Street.
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We can’t do better than those who trade
for a living, and we shouldn’t be aiming
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for fast money anyway; chasing dollar signs
only makes us greedy and careless.
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Whether you are just starting out, or you've
been investing for quite some time you always
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want to walk the path of the Intelligent Investor.
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Maybe you won't become a billionaire in a
week but I guarantee you too can turn your
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investments into modest — but steady — profits.
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