The Intelligent Investor by Benjamin Graham is a classic investment guide that emphasizes a value investing approach. It teaches readers how to make sound investment decisions by focusing on the intrinsic value of a company, rather than market sentiment or short-term trends.
Key principles of value investing:
- Margin of Safety: Investors should buy stocks at a significant discount to their intrinsic value. This margin of safety acts as a buffer against potential losses.
- Intrinsic Value: This is the underlying value of a company, based on its assets, earnings potential, and future prospects.
- Mr. Market: Graham personifies the market as an emotional and sometimes irrational entity. Investors should not let Mr. Market's moods dictate their investment decisions.
- Defensive Investing: A conservative approach that focuses on long-term stability and income.
- Enterprising Investing: A more active approach that involves seeking out undervalued securities and special situations.
Graham also emphasizes the importance of diversification, risk management, and patience. By following these principles, investors can protect their capital and achieve long-term financial success.
