3 things we learned from “The Intelligent Investor” by Graham Benjamin

Even if you haven't read 'The Intelligent Investor', you already know that it’s widely regarded as one of the greatest books on value investing ever written.

The book was written by Benjamin Graham, a well-known financial investor, and educator known as the "Father of Investing”. The Intelligent Investor is an excellent book for learning about the stock market and how to navigate your investment path. Here are three key takeaways from the book.

Do your homework.

Due diligence is critical, particularly when buying certain stocks. Graham emphasises the significance of completing your research and investing only in companies whose businesses you understand. This is further supported by Peter Lynch, the renowned investment manager, who created his fourth investor rule, which claims that "you may outperform the experts if you leverage your advantage by investing in firms or areas you already understand."

Choosing such firms, however, is only the first step. Investors commonly skip the second (equally important) step of analysing the financial statements to ensure the organisation has a healthy cash flow.

Not all that glitters is gold.

Wise investors should look beyond a company's share price to determine its underlying value. Before investing, you should think about the company's fundamental characteristics, such as its history, industry, management strategy, and so on. For beginners, Graham advises investing more cautiously once you've completed your research. He recommends investing for the long term rather than responding to market fluctuations.

Don’t put all your eggs in one basket.

Putting all your eggs in one basket means depending on one investment class. This is unfavourable because changes in market prices and other factors like inflation can cause the asset to have a poor yield.

Benjamin Graham outlines the importance of investing in both equities and bonds. He also discusses investing in real estate as a method of diversification.

Your level of diversification will be heavily influenced by the kind of investor you are and the kinds of goals you set for yourself. The premise, though, remains the same: don't put all your eggs in one basket.

Due diligence, diversifying your capital, and understanding the business in which you are investing are all critical components of being an intelligent investor.

The book also explains at length, the differences between trading and investing -? as well as strategies to minimize downside risk. It’s a great read we totally recommend.