Value Investing - Recommended Book - Must Read for Investing Enthusiasts

I love sharing a great book when I see one and this is it, 'The Intelligent Investor' by Benjamin Graham, who is widely known as Warren Buffett's mentor in investing. I'm sure some of you have heard of or have also read this book before. 

I read it around a year ago and it was what got me started in Real Value Investing. It was a fundamental breakthrough for me as it shifted me away from how I used to 'Invest': alot of emotion, timing, speculation, eagerness to make a quick buck, short term mindset, lack of awareness about the stocks I bought, the list goes on. This book basically addresses the paradigm and helps adjust your mindset towards investing. Alot of the time the problem really lies with us and how we view investments as a whole. Even till today, as I read alot of investment blogs, I only see a handful of fellow investors who truly appreciate and value what real value investing represents. 

I would strongly strongly recommend anyone who is serious about investing and doing it well and wisely to pickup this book. Be forewarned that some parts are very detailed and complicated to understand but I shall sum up the gist of the book in 3 main points that I have understood and apply regularly.

1. View Investments as Businesses not Stocks

- This is critical. When we buy a stock we usually treat it as a ticker or symbol, something that we just play around with. This mindset sets an obstacle to true investing. When we buy a stock, we need to think of it as buying shares in a BUSINESS. We need to think of the investment as a stake in the company, as a business. We need to be acutely aware of what the company actually does, does it have long term prospects, etc. Another important point shared in the book was to identify business with large moats (ie high barriers to entry, sticky businesses, hard to replace). Additionally, de-linking the thought of buying a stock and thinking of your investment as a part stake in a business will immediately set you thinking differently and more importantly, strategically. One great example I always think of is Singtel and how people are constantly glued to their mobile phones, evolution of apple watch, 4G to 5G, etc. There is so much potential to this company based on simple representations of everyday life and use. This gives me great confidence in investing in this business for the next 10, 20, even 30 years.

2. Always Have a Margin of Safety

- Now, this is easy to understand and say but extremely difficult to apply. Basically what this means is to find stocks that are trading at a price level that is at a deep DISCOUNT to its intrinsic value. So even if you purchase the stock and it does drop, the potential drop in price is minimised. Basically buying good stuff for cheap prices (being a stock cheapskate lol). Why I say its hard is because of two things.  Firstly, it's really hard (not impossible) to find cheaply value stocks. Usually you would find them when the market corrects, dips, or there is a temporary disjoint between what the market feels about the company versus its current price. Secondly, the other problem is what you define cheap as and this is intricately linked to the calculation of intrinsic value for the stock. There are some ways taught in the book on deriving intrinsic value and one simple formula that can be used is the following:

3. Invest Long Term, be Disciplined & Patient

- Last but not least, understand and accept that investing is a long term process. Stay the course, delay gratifications and be disciplined. Invest regularly into your portfolio, reinvest your dividends into your portfolio, basically doing all the 101 things and refusing to do stuff like contra trading, market trending, speculation stuff. Learn to stay the course over tine and reap the full benefits of your investments. Remember Warren Buffett only made his billions when he was in his 50s so alot of the businesses he bought years ago, he still owns today. PATIENCE in investing is a key virtue and a very important one at that.

There are plenty of other lessons to be taken away from the book but the above 3 have impacted my investment philosophy immensely and given me a new found paradigm and empowerment to investing. This to me is best reflected in my current portfolio and I am immensely glad with how it looks and will continue to be. And it also brings me great joy to share this knowledge with you. 

Sincerely hope the above sharing has positively helped you in some way.

Have a great weekend ahead!

Transitioning Stock Investor