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Lessons from the Best: Benjamin Graham


Stay invested, do your research and focus on the long term
 
Many people consider Benjamin Graham to be the “Father of Value Investing.” His insights on investing have inspired the great minds of Warren Buffett and many others. Here are a few lessons from his famous book, The Intelligent Investor that I hope will also inspire you.
 
Lesson #1: Invest in value
“The stock investor is neither right or wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.”*
 
As a value investor, Graham believed in buying high-quality but undervalued stocks that most of the market was avoiding. Graham knew that markets tend to overreact to both bad and good news. This means good stocks sometimes trade at lower prices because of temporary challenges that are likely to be resolved eventually.
 
If Graham’s analysis indicated that an undervalued stock had solid fundamentals and would likely perform well over the long term that was good enough for him. What better way to benefit from the “buy low and sell high” philosophy?
 
Lesson #2: Invest with conviction
“The underlying principles of a sound investment should not alter from decade to decade...”*
 
In 2008-2009, the world experienced one of the worst bear markets on record. Many investors saw the value of their stock portfolios plunge. Some panicked, sold out of the stock market and stayed out for many years. They preferred to keep their money in cash and fixed income investments (like government bonds and guaranteed investment certificates).
 
Stock markets are relatively volatile right now, but you shouldn’t make the same mistakes investors made in 2008-2009. Instead, invest through the volatility. You might experience some short-term losses, but you’re also likely to benefit from solid gains when markets improve again.
 
Lesson #3: Keep your eye on the long term
“Invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.”*
 
This one’s simple. The most successful investors invest for the long term. They don’t let short-term price fluctuations affect their confidence in their investments or investment strategy. And they never try to “time the market.”
 
Interested in more insights on investing? Contact our office today to set up a meeting.
 

* Source: The Intelligent Investor (Re-issue of the 1949 edition). Benjamin Graham. Collins. 2005. 

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