the intelligent investor pdf

Intelligent Investor: Chapter 14

November 25, 2020 by Laxman Sonale 2 Comments

Hello friends, I am Laxman. In today’s article, we see Chapter 14 of the intelligent investor book. In chapter 14, Benjamin gram explains the Defensive investor’s criteria. These criteria help you to pick good return stocks for defensive investors. Chapter 14 of the intelligent investor give some idea for a defensive investor. Those don’t want to give full time for the research analysis. Those criteria as follow.

Previous Chapter 13

7 Criteria for stock Selection:

Adequate Size of Company: Defensive investors have to consider the large size of the company for their money safety. Investing rule no.1 is that Never lose money. If you don’t make money it’s ok but doesn’t lose money. So, for this reason, select the adequate size of the company.
Strong Financial Condition: Sticking with the first rule of investing, you have to select a strong financial condition company. ( Intelligent investor: Chapter 14)
Earning Stability: Defensive investors have to check for the earning stability with continuous five to 10 years, and also check if it goes negative in any year.
Dividend Record: If you are a defensive investor, that means you have to check the dividend record If the company gives the regular dividend and gives slow growth in the dividend.
Earnings Growth: Defensive investor also checks for the earnings growth, which increases 3% in 10 years and 33% in the previous year.
Moderate P/E ratio: Defensive investors also check for the Price earning ratio. This ratio is about less than 15. This ratio, not more than 15. (Intelligent investor: Chapter 14)
Moderate P/B ratio: Defensive investors also check the P/B ratio. This ratio is not more than 1.5.

You have to consider the P/E and P/B multiple is not more than 22. if you consider the above criteria, you will be a good defensive investor. Defensive investors are those that not have enough time to research and not understand the proper accounting. Benjamin gram refer the investors which don’t have time to become enterprising investor, they have to select the longs terms index funds, that have minimum charges. you want to research for the company as a defensive investor you have to consider the above criteria. So benjamin gram gives some due diligence for the defensive investors, they are as follows.

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Due Diligence:- Intelligent investor: Chapter 14

Do your homework: If you want to select stocks on your analysis, you have to read the 5 years annual reports, quarterly reports, and proxy statements. After this, you have more knowledge about the company.
Check out your neighborhood: As a defensive investor, you have to check any investment of institutions investors, that more than the 60%. If the answer is yes then don’t invest in that company. Because when these institutions investors, make a profit they will sell the stocks then stocks price goes down. so for this reason, ownership of institutional investors is not good for individual investors.

This is all about Chapter 14 of intelligent investors.

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Intelligent Investor: Chapter 8

November 10, 2020 by Laxman Sonale 6 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 market. Warren Buffet(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.

previous chapter: Click here

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 a stock with a great company. It’s is the only way you can make money with our value investing philosophy.

When you make money, you time the market. This is 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 also called fool 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 your control over yourself, so the author gives us three important points to ask yourself about the stock, they are as follows

Should you sell now? If you ask this question to 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 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 it’s important now to sell for your financial circumstances, and also company financial circumstances, management.

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

Mr. Market:-Intelligent investor: chapter 8

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

Bipolar Disorder: Mr. market has a disease called bipolar disorder, in this disease Mr. market 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 the other is bad mood swings, and they want you to behave like that. (Intelligent Investor: Chapter 8)
Ignore Mr. market: Ignoring the Mr. market, you have to be very much discipline, 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 is your servant, not you are 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 control your own behavior, If you can’t control the above point you have to the Index fund Investing a 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 doing trading by analyzing the charts of trade and try to identify the pattern by using the 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

Next Chapter 9

The Intelligent Investor: Chapter 2

November 6, 2020 by Laxman Sonale 1 Comment

Hello friends, Today’s article we discuss chapter 2 of intelligent Investor. In chapter 2 of intelligent investors we The Investor and Inflation.

Previous chapter 1

The Investor And Inflation:-The Intelligent Investor: Chapter 2

In this chapter Benjamin gram discuss the What is the inflation and how inflation effect on the investor and it’s an investment, as well as Intelligent investor how to beat the inflation and get the good return from the investment for that purpose Benjamin gram to give some advice for Intelligent Investor, They are as follows:

Money Illusion:-The Intelligent Investor: Chapter 2

Money illusion is the type of money trap that we lose the value of money and can’t get back. Let’s understand the concept.

Money has some value, but the value of money is decreased by inflation. let’s take the one example of Geeta. Geeta has money of 1 million in his bank account for one year.

In that year inflation rate rises up to 7% and you know bank return in between 4 to 5 %. So she gets a return of 4% but the inflation is 7% so they lose the money of 3% of all money,

This loss called the money trap and also called the money illusion.

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Gold as an Inflation hedge:-The Intelligent Investor: Chapter 2

Gold is the metal and so it’s likely metal. So in our society gold has its own value.

It fully depends on the demand and supply so its supply is very poor. so demand is more for that reason it’s going to be raising its price.

So for that Gold, sometimes hedge the inflation, But most important is that not anytime hedge the inflation by the gold. So put money in the gold is sometimes is good decision for the security of money but it’s not called an investment. (The Intelligent Investor: Chapter 2)

You can put money in the gold but you have to check to do diversification and found out the minimum charges that the company gives to you for that.

Real Estate as an Inflation hedge:

Real Estate can be the best for the inflation hedge because when inflation rises you can raise the rent of real estate.

But you have to buy the right property, right time, right place, by considering this you can put money in the real estate to hedge the inflation. But you have gained knowledge of real estate and do in that investment for an inflation hedge.

Real Estate Investment Trust:

This is the type of company that invests in real estate so you can buy its company share. But it’s as risky as other company but it has good management which has a good knowledge of real estate investment. You can invest in the company to hedge inflation.

This above some advice given by Benjamin gram( warren buffet mentor). so if you follow this advice you will be going to hedge the inflation. (The Intelligent Investor: Chapter 2)

the book summary of one up on wall street book: Click here

Next chapter 3 of The Intelligent Investor book

The Intelligent Investor: Chapter 1

November 5, 2020 by Laxman Sonale 2 Comments

hello friends, I am a Laxman today’s we see Chapter 1 of The Intelligent Investor. In this chapter, we discuss Investment and speculation. Chapter 1 of The Intelligent Investor book, explains the difference between Investment and speculation. If you understand the difference between investment and speculation, then you learn the real investment principles from chapter 1 of The intelligent investor book.

The previous chapter

Investment vs Speculation:-The Intelligent Investor: Chapter 1

Investment: Investment is like you take the decision and that decision has the proper reason. So that Investment decision called Investment. Investment maximum time you make money.

Speculation: Speculation is like you make a decision without any proper reason or logic. Just you think is a good decision and the result you think always be positive. In speculation maximum time you lose money because you are fully dependent on luck.

Benjamin gram provides the Three Element of Investment for every Investor who tries to make money. Let’s see that element.

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3 Element of Intelligent Investor Investment:-The Intelligent Investor: Chapter 1

Do a thorough analysis of Company
Take the promises of the safety of Principle
And also promises of Adequate Return

If you consider the above point get some logic and Investment meaning behind these 3 elements. If you ignore this point and make an investment you are doing simply speculation. Finance world, one quote is like ” If you make Investment you make money for yourself, and If you speculate you make money for your broker.”

Benjamin Gram Give some point of Unintelligent Speculation, they are as follows

Unintelligent Speculation of Investor:

Speculating is happen when you think you are Investing.
When you speculate and Take it seriously.
And also Taking risk more money than you can afford

Benjamin Gram gives the above point of Unintelligent Speculation. the author also said Speculation can be made fun of you by doing the following points. (The Intelligent Investor: Chapter 1)

Speculation can be fun:

Mad money account: Benjamin gram said If you want to test your luck or destiny then make a separate account and give them a name i.e. Mad Money Account. In this account do not put all your money, Put aside a portion of 10% of your all-over investment amount.
Never add more money no matter what: If your luck is good and you want to make more speculation or also any think, You can not add more money in that account whatever it takes.
Never mingle mad account with Investment account activities: Don’t be mix the speculation account and investment account.
Not Even In your thinking: The thinking pattern is matters here if you make the separate account keep them separate and not think to mix them. You can learn how to control your own behavior because investors are the enemy of themselves, we see in the introduction part of this book.

considering the above point, you can make the Speculation fun. In the next chapter, we see Inflation and Investment.

Next chapter 2

The Intelligent Investor book: Introduction

November 4, 2020 by Laxman Sonale Leave a Comment

hello friends, I am Laxman, we are seeing the Financial book name as The Intelligent Investor is one the famous book. Let’s start Intelligent investor: introduction. In This book, Intelligent Investors in the introduction gives the characteristics of an Intelligent Investor.

Characteristics of Intelligent Investor:-The Intelligent Investor book: Introduction

Patient:
Disciplined
Emotions Under control
Don’t care what other people think

the above-mentioned character has to be an Intelligent investor, Most of the people not become good investors cause lack of the above quality.

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More Characteristics of Intelligent Investor :-The Intelligent Investor book: Introduction

Matter of character: if you have a brain is not important. your mindset is important for the company.
Worst enemy: The worst enemy of Investor is himself.
Ordinary people perform well: In the stock market most of the time, common people perform well. As compare to finance peoples. (The Intelligent Investor book: Introduction)

Some advice of Intelligent Investor from the author:

Dreadful losses: In the stock market, people forget to ask the question about the stock price. They got the stock at any price that sees on the market. The author says try to ask how much of the price of the stock.
Buy stock like Groceries: In buying stock investors have to ask, the stock price. And buy the stock at a cheap price doing bargaining.

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The author develops some core principles of Intelligent investors.

Core principle:

Stock is not a ticker symbol: Stocks are the business pieces, they have the ownership interest and you are buying the business.
The market is like Pendulum: Market goes in up and down, the intelligent investor has to be patient and buy from the pessimism and sell to the optimistic investor. Be realistic and ignore the market swing.
Future Value is a function of the Price you pay today:
Risk of being wrong: In the stock market, You can not eliminate the risk of being wrong. And I choose whatever stock is going too high. this is not possible in the stock market. The stock market is not run on luck.
Discipline and Courage to ignore the Market: you have to develop Discipline against other people and your stocks and Courage to Think rationally. (The Intelligent Investor book: Introduction)

The Father of Value Investing is Benjamin Graham. The author gives, the above core principle of Intelligent Investor. In my opinion, These principles are logical. we have to ignore the market mood swing. If you develop this you will be the rich people. If you follow this book, you will get the specific principle, and follow them to avoid the stupidity in the market, that help to make maximum money by compounding principle.

Next chapter 1 of The Intelligent Investor book