During this time of financial turmoil, with the country’s economy sprinting towards recession, Stony Brook University MBA student (and former Treasurer of The Library Club) Sinan Cinar examines the textbook “The Intelligent investor”, which covers the ins and outs of smart investing.
This book doesn’t tell us how to beat the market. Instead, the purpose of the book is to supply, in a form suitable for laymen, guidance in the adoption and execution of an investment policy. Comparatively little was mentioned here about the technique of analyzing securities. There are three major topics which book is trying to accomplish.
· How we can minimize the odds of suffering irreversible losses
· How we can maximize the chances of achieving sustainable gains
· How we can control the self-defeating behavior that keeps most investors from reaching their full potential.
This book is pretty good guide for professional and non professional investor. To be an investor, you don’t have to be very knowledgeable about finance. If you read the book, even people who don’t know anything about stocks invest money into stocks. But they should consider the advice provided in the book.
Graham states that there are two types of investors that are considered. One of them is a defensive investor and the other one is an enterprising investor. The defensive investor should follow some steps if he doesn’t want to hit the wall in the first attempt. The biggest advice for the defensive investor is not to take higher risk. To control the risk level, the investor should keep some proportion between stocks and bonds in this portfolio. This range changes between 25% and 75%. It means that the investor should invest at least 25% or highest 75% to stocks and rest of proportion should be invested to the bonds. This proportion may change according to the condition and the risk level of the market. Also, if the investor is not successful to pick the right stocks and bonds, he should take professional advice from the professional brokers and portfolio managers. It is very important because if you don’t know how to go somewhere, you should take some help from the map and this map in this situation is professional portfolio managers and brokers.
For the enterprising investor, the steps vary a little bit according to the defensive investor. The book mentions that if we want to be enterprising investors, we should devote most of our time to analyze and collect the right information about the stocks. Further, the investor should do a lot of practicing before investment.
Actually, the book doesn’t guarantee the higher return in the investment but at least, it gives lots of useful tips how to be a successful investor and to protect ourselves from the risk in the investment. Further, it defines our common mistakes and delusions in the investments. One of them is patience. Firstly, the investor should be patient and should invest for the long run. Secondly, the investor shouldn’t invest emotionally in the stock market. Finally, we should also prepare ourselves for the bad results and determine the risk level which we afford to take in the investment.
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