intelligent investor mr market chapter

Intelligent Investor: Chapter 20

December 2, 2020 by Laxman Sonale 20 Comments

hello friends, in today’s article we see chapter 20 of the intelligent investor book. In this chapter, we get the Margin of safety, its advantage, and how it is important for us. Chapter 20 of the intelligent investor book, is a famous chapter and also important for investment.

The margin of Safety:-Intelligent Investor: Chapter 20

Let’s understand the margin of safety with examples, let’s consider the one bridge that has a 200-tonne capacity, on this bridge you try to pass the 199-tonne capacity truck. Most of the time your bridge is broken. So to avoid an accident, you have to take the margin of safety. If you pass the truck which has a weight of 150 tons, then you can pass the bridge without an accident.

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So when you make an investment in the stock market. you have to consider the margin of safety. Investment with a margin of safety is good, and the best is the margin of safety with your life. (Intelligent Investor: Chapter 20)

So the author gives some points you should know.

Things to know:

Relationship between the margin of safety and diversification: When you use the margin of safety or diversification, there is only one motive is to minimize the risk of investment. so there is some relationship between the margin of safety and diversification.
The secret to how to get rich is “Don’t lose”: In investment, the most important part is that don’t lose principal money, If you lose money, then you can not recover the loss of money. so recover this loss you have got a 100% gain or sometimes 1000% gain. So the best way to get is don’t lose money. (Intelligent Investor: Chapter 20)
Always remember you can’t time the market: so many traders or some investors try to time the market for quick money, but most of the time lose their money. The intelligent investor doesn’t try to time the market. They always leave away from trading.
Don’t pay so much for a stock that you will have to regret it later: The author is telling about overvalued stock buying.
Some questions to ask yourself before making a decision: for this, you can ask yourself is that the worst condition of the company can be recovered in past, and also if your all money is lost, you will be fine with that. You can also ask what is lost in the company instead of the probability of that succeed.

This is all about the margin of safety from chapter 20 of the intelligent investor book.

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Intelligent Investor: Chapter 15

November 29, 2020 by Laxman Sonale 3 Comments

Hello friend, in today’s article we see chapter 15 of the intelligent investor book. In this chapter, benjamin gram discusses the enterprising investor criteria. These criteria help you to become an enterprising investor in-stock selection. Let’s see chapter 15 of the intelligent investor book.

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6 Criteria for the stock selection:-Intelligent Investor: Chapter 15

Strong financial condition: Each and every investor those are a defensive investor or an enterprising investor sees the strong financial condition of the company. This condition helps you to boost your confidence about the investment, so check for a strong financial condition. (Intelligent Investor: Chapter 15)
Earning Stability: Enterprising investors also check the earning stability and this earning increase by 5 % in a positive way. For this purpose, you can consider the previous year’s earnings.
Dividend Record: Great investor of all time warren buffet says, ” Your investment principle gets from the dividend, and with this dividend, you can invest in other companies. all your investment money comes in dividend form, so check for the dividend record. “
Earnings Growth: with a dividend record enterprising investors also check for the earning per share i.e. earning growth. This EPS increased by 4% in these years as compared to the previous year.
Moderate P/E ratio: You can also for the price-earning ratio. this ratio is not more than 15. If your price-earning ratio is more than 15 so don’t buy that company’s stocks. This type of company takes money from the investor for the trading event. this type of event can be changed every time. (Intelligent Investor: Chapter 15)
Moderate P/B ratio: enterprising investors also check for the price-book ratio. this ratio is not more than 1.5. and also make calculations between the p/e ratio and p/b ratio it’s multiple is not more than 22.5.

we see the 6 criteria for stock selection for the enterprising investor, with this author, gives us some other things that every enterprising investor considers.

how to become a value investor

Other things to consider:

Net-Net result: enterprising investors see the net-net result that means current asset – current liability. making this calculation you get the exact condition of the company.
Special situations: enterprising investors check for the company’s special situations like acquiring the company, novel discovery, etc. (Intelligent Investor: Chapter 15)
Selecting individual stocks is not necessary: If you are very busy with your work so you can hire a broker for your Investment.
Use virtual money to pick stocks: If you are a beginner in the stock market. Benjamin gram recommends you practice for one year with the virtual money to pick stocks. After this, you can use your real money for the investment. (Intelligent Investor: Chapter 15)
Index funds: author give the most advice the buy index funds with minimum charges and invest them each and every month.

after this author gives us the two traits of an enterprising investor, those are as follows:

Disciplined and consistent: Don’t change your approach even if it is unfashionable regarding stock selection.
Pay little attention to what the market is doing: enterprising investor has to focus on what they need to do and how to do it. (Intelligent Investor: Chapter 15)

this is all about the enterprising investor traits and criteria

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Intelligent Investor: Chapter 8

November 10, 2020 by Laxman Sonale 12 Comments

Hello friends, in today’s article we see chapter 8 of the intelligent investor. Investor and market fluctuations, this chapter explains how investors behave and also the market. Warren Buffet(the world’s greatest investor of all time says) ” In intelligent investor book, teach me the two lessons, in chapters 8 and 20.” So chapter 8 of intelligent investors is the most important chapter of all time in Value investing.

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Investor and Market fluctuations:-Intelligent Investor: Chapter 8

In this chapter, the author says there are two ways to make a profit in the market.

Pricing:
Timing:

When you make money, you buy a cheap price of stock with a great company. It is the only way you can make money with our value investing philosophy.

When you make money, you time the market.

This job is horrible because you make a little profit of 100 times but you lose a single profit more than the value of 200 times.

So most of the time when you try to time the market,

you go to the speculation side, and the most interesting thing is that you think, you are doing the investment instead of speculation.

This is also called fooling yourself. (Intelligent Investor: Chapter 8)

the author gives us some pointers to remember about the market, they are as follows

When the market goes up:-Intelligent investor: chapter 8

When the market is going up, you are very happy and in that flow of happiness you lose control over yourself,

so the author gives us three important points to ask ourselves about the stock, they are as follows

Should you sell now? If you ask this question, you get your answer to that.
should you curse yourself for not buying more, when the price was low?
Should you buy more now?

This type of question asks you yourself if you get the right answer this answer depends on your behavior and your philosophy.

In my opinion, when you try to sell this stock ask yourself if it’s important now to sell for your financial circumstances, and also the company’s financial circumstances and management.

After this Benjamin gram gives us the famous concept called the Mr. market, let’s see it in detail.

Mr. Market:-Intelligent investor: chapter 8

The author gives us the market is a living thing, and they have human behavior. Considering this concept author gives us some pointers to handle the Mr. market, which are as follows.

Bipolar Disorder: Mr. market has a disease called bipolar disorder, in this disease Mr. market is happy sometimes and sad sometimes. This disorder is very much harmful to the investor. So this happens with the market at that time you can ignore the market for your protection.
Mood Swings: Mr. market has two types of mood swings, one is good mood swings and other is bad mood swings, and they want you to behave like that. (Intelligent Investor: Chapter 8)
Ignore Mr. market: To ignore Mr. market, you have to be very disciplined, and When you want to deal with the market. do when their mood is good, ignore when they have a bad mood.
Make him your servant: You have to make Mr. Market your servant, not you the servant of Mr. market, This you can do only by ignoring Mr. market.

So dealing with Mr. market you have to control the following things

Brokerage costs
ownerships cost
expectations
Risk
Tax bills
Own behavior

Value investing means controlling your own behavior, If you can’t control the above point you have to the Index fund Investing daily month on month.

this also gives you the best return in the long run. (Intelligent Investor: Chapter 8)

So the author gives us the same point on controlling their own behavior, they are as follows

Advice:

Our brains are designed to identify patterns: So many people do trading by analyzing the charts of trade and try to identify the pattern by using applied mathematics.
Don’t check the value of your portfolio frequently: for this, you can consider the portfolio as your house.
For this purpose you can follow three things: 1) Dollar-cost Averaging 2)Rebalancing 3) signing the investment contract. An investment contract is given in this book, you can see and understand the deep of that contract.
Tax benefits: For this purpose, you can do the Index fun Investing, is this the best option for the tax benefit? (Intelligent Investor: Chapter 8)

Following this advice you can understand how the market fluctuates and what to do with investors, and also you have to understand the Mr. market.

This is all about chapter 8 of the intelligent investor.

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another financial crisis lesson from 2008

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