Article by Vintage Value Investing
magine if you could get the same investing advice that Warren Buffett got when he was just starting out.
Just think of what it would be like to learn from Warren Buffett’s mentor the way he did.
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That mentor – Benjamin Graham, is one of the most respected minds in the investing world even today.
Ben Graham authored one of the greatest books on investing of all time, The Intelligent Investor, and has provided sound advice for investors for decades.
Here are 5 of some of Benjamin Graham’s wisest thoughts on investing:
1. “While enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.”
In most cases, one needs passion to succeed. You have to muster up the emotional strength to push forward when reason says to retreat. This, however, is a bad practice for investors. In fact, the exact opposite is true. In investing, one must learn to put all feelings aside and move forward based on factual, sound reasoning alone.
2. “To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.”
Learning to invest is not difficult. Almost anyone can do it. With a bit of learning and experience, you can make a decent amount of returns with not a lot of effort involved. However, if you want to transition from average to extraordinary, the entire scene changes. It may be easy to assume that just as one can make a decent return with little effort, (s)he can then make a good bit more of a return with just a little extra input. That, however, is not always the case. There isn’t a lot of middle ground between average and excellent in the investing world. You either do a minimum and ride it out or do it all the way and aim big. Just a little more, however, may result in disaster.
You can see Benjamin Graham’s influence in Warren Buffett through this popular quote from the Oracle of Omaha: “It’s pretty easy to get well-to-do slowly. But it’s not easy to get rich quick.”
3. “The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.”
Who better to say this than Benjamin Graham? His classic book on investing, The Intelligent Investor, was originally published in 1949. Its principles have stood the test of time and offer insight to today’s investors just as it did to those in the early ‘50s. However, applications change. One may have used Graham’s principles, for example, to invest in rental movie stores or bookstores in the mid ‘90s, while video streaming and e-books have altered that market drastically over the last decade. Investors can still use the principles, but the applications must always change with the times.
4. “Investment is most intelligent when it is most businesslike.”
Investing is done best when it is treated, not like a hobby, but like a business. If you see it as a side job, separately from business principles, the results will not be as profitable. You are looking at businesses. Analyzing them. Buying them. Selling them. The entire stock market centers around the economy of business. In order to be successful, investors treat investing like a business of its own.
5. “Operations for profit should be based not on optimism but on arithmetic.”
Do the math. Look at data. It’s not about what someone says, or the hot new idea fresh off the press. Just because the newspaper forecasts high returns for a certain company doesn’t make it true. Avoid the buzz and do the research. Numbers never lie.
Summary
All in all, Benjamin Graham’s words are timeless. They encourage us, inspire us, and teach us sound advice for investing.
Use what he said. Apply it. Take it to the market and adapt it to your goals. The results are sure to follow.
