Many people will have a question. As an amateur investor, I lack time, professional methods, and funds. How should I invest?
Regarding investment, there has never been a lack of investment education books and lectures in the market. Investment concepts such as value investment, long-term investment, and venture investment are emerging one after another, but few people seriously talk about how an amateur investor should understand investment. What kind of investment attitude and what kind of investor you should be.
“Smart Investor” is such a classic book that tells amateur investors how to invest. Since the publication of this book in 1949, it has opened the “scientific investment” career of countless investors. The author Benjamin Graham has many reputations such as “the father of modern securities analysis” and the founder of value investment theory. This book is called by the stock god Buffett the greatest investment book ever, and it is also the key to the opening of Buffett’s value investment philosophy. It was after reading “Smart Investor” that Buffett began to believe in and practice value investment. To this day, “Smart Investor” is still extremely popular and has become the “Bible” on the stock market, influencing generations of investors.
“Smart Investor” is a complex and simple book. It is complicated because many investment concepts and analysis methods in the book are still valid and regarded as the standard by many investment predators. It is simple because this is an investment book written for amateur investors. The whole book revolves around the topic of “how to be a smart investor”.
Before thinking about how to become a smart investor, the first thing that needs to be clear is “what is a real investment”. Those behaviors that have a strong element of chance are all speculative behaviors and should be avoided as much as possible in investment.
However, greed and gambling are human nature, so don’t try to completely avoid the speculative elements in your investment career. Many newcomers are in the good market when they first come into contact with stocks, just like a new gambler, with a heart that wants to get rich, seeking pleasure in the thrill of ups and downs, and swinging wildly in greed and terror. What investors need to do is to strictly distinguish between investment and speculation, and to strictly restrict speculation. This is the prerequisite for being a smart investor.
At the same time, Graham clearly pointed out based on a large number of facts that smart investors have nothing to do with personal IQ. They are more manifested in personality, such as patience, self-discipline, eagerness to learn, control of their emotions, and self-reflection.
The most typical example is Newton’s investment in the South China Sea Company’s stock, which is sold when the return rate reaches 100% and the profit is 7000 pounds. But only one month later, the frenzied market sentiment allowed Newton to buy back the stock at a higher price, eventually losing 20,000 pounds. It is precisely because of this that Newton left a well-known testimony: “I can calculate the movement of celestial bodies, but cannot calculate the madness of mankind.” Therefore, it is a prerequisite for good investment to restrain speculation.
Graham believes that the margin of safety is the central idea of investment and the main line that runs through all previous investment strategies. The margin of safety can be understood as ensuring the safety of the principal in every investment.
However, even if the investment targets have a high margin of safety, it is still impossible to ensure the complete avoidance of risks. Therefore, a decentralized strategy is required in investment. The margin of safety can ensure that for every investment in a security, the chance of profit is greater than the chance of loss. When more and more types of securities with margin of safety can be purchased, the possibility that the overall profit will exceed the overall loss will increase, which is also the meaning of diversified investment.
Finally, every investor must make it clear that the purpose of investment is not to obtain very good results, not to outperform the market, but to obtain satisfactory results.