the intelligent investor chapter 4 summary

Hello friends, In today’s article we see what is the enterprising investor and the qualities that help to get success, these qualities form the intelligent investor book, In the article, we discuss enterprising investing, the quality needs to get success from chapter 6 and 7 of The Intelligent Investor book. let’s see step by step.

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Enterprise Investor needs qualities to succeed:

To become an enterprise Investor, you have to face two challenges they are as follows

• Enterprising Investing is physically, and intellectually challenging
• It requires lots of time and lots of energy.

the author gives some knowledge required to become an enterprise investor. an enterprise investor is not doing trading all day. So for that purpose author give some point regarding day trading to become an enterprise investor. (Enterprising investors need qualities to succeed)

Day Trading:-(Enterprising investor need qualities to success)

1. Day trading as financial suicide: When you are trading, you have to sell the share on that day. It becomes sometimes risk and the maximum time you lose more money, for this reason, the author says about this on day trading.
2. The broker always makes money: In day trading broker always makes money, they make money when you buy. And also when you sell a share of the company.
3. Difficult to Brake even: Day trading is very hard to give up on those things when you doing that. In this process you try to convince yourself to you can do better. (Enterprising investors need qualities to succeed)
4. Some bets you win, but most you lose: In day trading time you win by your luck, and the maximum time you lose the tonne of money in day trading.
5. Patient investors get to keep almost everything.
6. Say no to IPOs is probably overpriced: In IPO people decide the price of shares with an optimistic point of view, they think someone else sits in the market to give them more money on share. So the reality is that the market is the Voting machine in the short term and the weighing machine in the long term, so say no to IPO. (Enterprising investors need qualities to succeed)

The author gives us some pointers to be considered as an enterprise investor, they are as follows:

Some knowledge of Enterprise investors: (Enterprising investors need qualities to succeed)

• Pay attention to value, not price: The market is the voting machine in the short term, so pay attention to the value, not on price, price can fluctuate or manipulate by some traders.
• Be wary of stocks with good prospects: Buy the good stocks of a company with good prospects.
• P/E < = 25: The price earning ratio is less than 25 not only for one year, you can take it for five to seven years of average earning. (Enterprising investors need qualities to succeed)
• Look where others are not looking.
• To obtain better than average results, remember: 1) the Approach should be different from others 2) the Company should pass the test of soundness

After this author gives us some recommendations to look for the opportunities, they are as follows.

Where to look for opportunities(Three Recommendations):

1. Relatively unpopular large companies
2. Purchase of bargain issues: In this, you get the bargain issues by doing Current asset – total Liabilities = intrinsic value, so you can get the good opportunities here. (Enterprising investors need qualities to succeed)
3. Special situation: when the bear market time you get the maximum opportunities that have good prospects. say no to the preferred stocks.

After this explanation author gives some advice that relates to the ideal word for Intelligent investors. they are as follows.

Some Advice:

• Can’t time the market: most people do that but it does not run the intelligent investor.
• A great company is not a great investment if you pay too much for it: so if you need a maximum return and then buy a small company with good prospects.
• The sale and market cap of small companies double easily.
• Invest in big companies when something goes wrong.
• Don’t put all eggs in one basket.
• Great fortunes are made by concentration but not stable for the long term, so put your egg with different companies also. (Enterprising investors need qualities to succeed)

So if you follow this advice you will become an enterprise investor, lastly, the author gives us some recommendations they are as follows:

• Research stocks that have hit a 52-week low
• Invest in foreign stock also.

 

Read more: One up on wall street book summary

Read more: Common stocks and Uncommon Profits book summary

This is all about the enterprise investor in chapters 6 and 7 of the intelligent investor book.

 

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Next chapter 8 of The Intelligent Investor book