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A stock does not become a sound investment merely because it can be bought at close to its asset value. The investor should demand, in addition, a satisfactory ratio of earnings to price, a sufficiently strong financial position, and the prospect that its earnings will at least be maintained over the years

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Daniel Campos
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The Intelligent Investor

Notes from Benjamin Graham’s book The Intelligent Investor.
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Daniel Campos
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To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making deci- sions and the ability to keep emotions from corroding that framework
Daniel Campos
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A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price
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The intelligent investor is a realist who sells to optimists and buys from pessimists
Daniel Campos
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No matter how careful you are, the one risk no investor can ever eliminate is the risk of being wrong
Daniel Campos
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“Those who do not remember the past are condemned to repeat it.”
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The defensive (or passive) investor will place his chief emphasis on the avoidance of serious mistakes or losses
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The determining trait of the enterprising (or active, or aggressive) investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than the average
Daniel Campos
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It has long been the prevalent view that the art of successful investment lies first in the choice of those industries that are most likely to grow in the future and then in identifying the most promising companies in these industries
Daniel Campos
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The virtues of a simple portfolio policy have been emphasized—the purchase of high-grade bonds plus a diversified list of leading common stocks—which any investor can carry out with a little expert assistance
Daniel Campos
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This book will teach you three powerful lessons: how you can minimize the odds of suffering irreversible losses; how you can maximize the chances of achieving sustainable gains; how you can control the self-defeating behavior that keeps most investors from reaching their full potential
Daniel Campos
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But no matter how careful you are, the price of your investments will go down from time to time
Daniel Campos
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What is an Intelligent Investor? It simply means being patient, disciplined, and eager to learn; you must also be able to harness your emotions and think for yourself.
Daniel Campos
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In short, if you’ve failed at investing so far, it’s not because you’re stupid. It’s because, like Sir Isaac Newton, you haven’t developed the emotional discipline that successful investing requires
Daniel Campos
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“while enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.”
Daniel Campos
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“the investor’s chief problem—and even his worst enemy—is likely to be himself.”
Daniel Campos
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“Obvious prospects for physical growth in a business do not translate into obvious profits for investors.”. By the time everyone decides that a given industry is “obviously” the best one to invest in, the prices of its stocks have been bid up so high that its future returns have nowhere to go but down
Daniel Campos
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The intelligent investor realizes that stocks become more risky, not less, as their prices rise—and less risky, not more, as their prices fall
Daniel Campos
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So take heart: The death of the bull market is not the bad news everyone believes it to be. Thanks to the decline in stock prices, now is a considerably safer—and saner—time to be building wealth
Daniel Campos
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“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
Daniel Campos
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Never mingle your speculative and investment operations in the same account, nor in any part of your thinking
Daniel Campos
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The defensive investor must confine himself to the shares of important companies with a long record of profitable operations and in strong financial condition.
Daniel Campos
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You must thoroughly analyze a company, and the soundness of its underlying businesses, before you buy its stock; you must deliberately protect yourself against serious losses; you must aspire to “adequate,” not extraordinary, performance
Daniel Campos
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Graham urges you to invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price
Daniel Campos
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The intelligent investor never dumps a stock purely because its share price has fallen; she always asks first whether the value of the company’s underlying businesses has changed
Daniel Campos
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As Graham never stops reminding us, stocks do well or poorly in the future because the businesses behind them do well or poorly—nothing more, and nothing less
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Never allow your speculative thinking to spill over into your investing activities; and never put more than 10% of your assets into your mad money account, no matter what happens
Daniel Campos
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For better or worse, the gambling instinct is part of human nature— so it’s futile for most people even to try suppressing it. But you must confine and restrain it. That’s the single best way to make sure you will never fool yourself into confusing speculation with investment
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Fortunately, you can bolster your defenses against inflation by branching out beyond stocks. Since Graham last wrote, two inflation-fighters have become widely available to investors: REITs (Real Estate Investment Trusts) and TIPS (Treasure Inflation-Protected Securities)
Daniel Campos
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REITs (pronounced “reets”), are companies that own and collect rent from commercial and residential properties.10 Bundled into real-estate mutual funds, REITs do a decent job of combating inflation
Daniel Campos
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TIPS are U.S. government bonds, first issued in 1997, that automatically go up in value when inflation rises. Because the full faith and credit of the United States stands behind them, all Treasury bonds are safe from the risk of default
Daniel Campos
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For most investors, allocating at least 10% of your retirement assets to TIPS is an intelligent way to keep a portion of your money absolutely safe—and entirely beyond the reach of the long, invisible claws of inflation
Daniel Campos
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The “price/earnings ratio” of a stock, or of a market average like the S&P 500-stock index, is a simple tool for taking the market’s temperature. In general, P/E below 10 is considered low, between 10 and 20 is considered moderate, and greater than 20 is considered expensive
Daniel Campos
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The intelligent investor must never forecast the future exclusively by extrapolating the past
Daniel Campos
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Anyone who claims that the long-term record “proves” that stocks are guaranteed to outperform bonds or cash is an ignoramus
Daniel Campos
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The value of any investment is, and always must be, a function of the price you pay for it
Daniel Campos
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“By the rule of opposites,” the more enthusiastic investors become about the stock market in the long run, the more certain they are to be proved wrong in the short run
Daniel Campos
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In the financial markets, the worse the future looks, the better it usually turns out to be
Daniel Campos
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We have suggested as a fundamental guiding rule that the investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequent inverse range of between 75% and 25% in bonds
Daniel Campos
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There are two ways to be an intelligent investor: by continually researching, selecting, and monitoring a dynamic mix of stocks, bonds, or mutual funds; or by creating a permanent portfolio that runs on autopilot and requires no further effort (but generates very little excitement)
Daniel Campos
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Graham calls the first approach “active” or “enterprising”; it takes lots of time and loads of energy. The “passive” or “defensive” strategy takes little time or effort but requires an almost ascetic detachment from the alluring hullabaloo of the market
Daniel Campos
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Some people will feel most comfortable combining both methods—creating a portfolio that is mainly active and partly passive, or vice versa.
Daniel Campos
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No intelligent investor, no matter how starved for yield, would ever buy a stock for its dividend income alone; the company and its businesses must be solid, and its stock price must be reasonable
Daniel Campos
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No intelligent investor, no matter how starved for yield, would ever buy a stock for its dividend income alone; the company and its businesses must be solid, and its stock price must be reasonable
Daniel Campos
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There should be adequate though not excessive diversification. This might mean a minimum of ten different issues and a maximum of about thirty
Daniel Campos
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Each company selected should be large, prominent, and conservatively financed
Daniel Campos
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Each company should have a long record of continuous dividend payments
Daniel Campos
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The investor should impose some limit on the price he will pay for an issue in relation to its average earnings over, say, the past seven years
Daniel Campos
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When stocks are priced reasonably enough to give you future growth, then you should own them, regardless of the losses they may have cost you in the recent past
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