Benjamin Graham was Warren Buffett’s inspiration, and he practiced Graham’s principles. It resulted in the great success that Buffett has today. Benjamin Graham’s techniques are adored by all serious investors, and Forbes generously breaks down 3 of his principles.
1. Buying with a Margin of Safety: Only buy stocks that you discover to be trading for much less than their intrinsic value; Their example was buying a $1 asset for $.50, yielding a 50% discount. Discounts are your friend.
2. Expect volatility and profit from it: Savvy investors don’t run in a down market. They look for deals. There’s 2 tactics you can try:
a. Dollar-Cost Averaging: Buying stocks at a set amount in regular intervals, which is good for passive investors. Avoids worrying over the perfect time to buy.
b. Investing in stocks and bonds: Always have a mixture of bonds and stocks as a way of preserving capital. “Graham’s philosophy was, first and foremost, to preserve capital, and then to try to make it grow.” Minority Fortune agrees! It’s recommended to have between 25-75% bonds mixed in depending on the market conditions.
3. Know what kind of investor you are: Passive or active. An active investor will become knowledgeable by doing research, combing annual reports, and perfecting their craft. Passive investors put in less work, opting for safe returns.
There you go. You know what the saying is: “No guts, no glory.” Study these principles. They’ll prove to be beneficial in your wealth income journey.
*Image courtesy of Urwealthy.
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