Books about achieving financial success are incredibly popular in the self-help industry, covering a wide range of strategies for achieving wealth. Many of these books spotlight individual success stories like Warren Buffett's or Donald Trump's, showcasing their unique paths to riches through investments.
While these stories can offer valuable lessons, it's important to remember that they are highly specific to the individuals and market conditions of their time. If duplicating their success were easy, we'd all be Warren Buffett or Donald Trump, and their stories wouldn't hold such fascination.
I've read a book called "The Intelligent Investor" by Benjamin Graham, and in this book, we shift away from the idea of copying someone else's success pattern.
Instead, we focus on the solid principles of science and how you can harness the power of stock market statistics. Graham begins by emphasizing that the key to successful investing is intelligence, particularly in managing risk.
We all know that the stock market is unpredictable; change is its constant companion. To succeed in the stock market, you must learn how to adapt and make informed decisions. Many people fall into the trap of believing that quick action is necessary to profit from stocks, especially given the market's volatility.
It's understandable to want to monitor it constantly when the market can shift dramatically at any moment. This mindset leads people to buy and trade stocks rapidly in hopes of outsmarting the market and reaping significant rewards.
This approach has been widely accepted as the norm for stock market use, but smart investors realize it may not be as effective as it seems.
Instead of rushing, intelligent investors carefully analyze a stock's potential. If their assessment shows that a stock's price is below its intrinsic value, they make the decision to buy. Buying when a stock's price is below its intrinsic value means there's room for growth in relation to the company's worth.
Sometimes, a company may not seem like a big deal to potential investors when it's just starting out. However, if you believe the company has the potential to become the next big thing and its stock value will soar, getting in early can be a wise move.
Think about it: imagine investing in Facebook before it became the global sensation it is today. Back then, it was just a small social media platform in a college dorm. At that early stage, Facebook might not have appeared remarkable to potential investors.
However, those who invested in Facebook during its early days were handsomely rewarded when it experienced tremendous growth. The same opportunity could be waiting for you if you invest in undervalued businesses.
This approach may require patience and a long-term perspective, but the intelligent investor understands that the long game is often the most profitable one.
Stop worrying about when your stocks will become profitable, avoid hasty decisions, and don't obsess over when your stocks' value will rise. Instead, get to know your stocks, understand your market, and wait. Have faith that the market will follow its natural course, and you'll be rewarded in due time.
In summary, the key lesson from this chapter is to assess your stocks for their pricing and potential, and only invest if you're confident in your assessment.