Benjamin Graham is the father of value investing.
His book Security Analysis, which you can download for free in this article, is a must read for every investor.
Here you can find Graham’s 20 golden rules for investment success.
1. Keep your emotions in check
To invest successfully, you don’t need a high IQ or unusual business insights.
What you need is a good strategy that allows you to make intelligent decisions and keep your emotions in check.
2. It’s about discipline and courage
How your investments perform in the short term is much less important than how you behave.
Have a lot of discipline and courage and don’t let other people’s mood swings influence you.
3. Be contrarian
The intelligent investor is a realist who sells to optimists and buys from pessimists.
Buy stocks when there is blood in the streets.
“The intelligent investor should recognize that market panics can create great prices for good companies.” – Benjamin Graham
4. Have a financial plan
It’s not important whether you are beating the market.
It’s important to have a financial plan that will get you where you want to be.
5. Bear markets offer opportunities
The sillier the market behavior, the greater the opportunity for investors.
Bear markets can make you very rich, you just don’t realize it at the time.
6. You are an owner
Invest. Don’t speculate.
As an investor, you own a part of the company you invest in. Act like it.
7. This time it’s not different
Abnormally good or abnormally bad conditions do not last forever.
In the long term, the stock market will be the best place to invest your money in.
8. Focus on the fundamentals
In the long term, the stock price will always follow the underlying performance of the company.
Use volatility in your advantage.
“In the short term the market is a voting machine, but in the long term it’s a weighting machine.” - Benjamin Graham
9. Focus on yourself
Investing isn’t about beating others at their game.
It’s about controlling yourself at your own game.
Always stick to your investment plan and goals.
10. Use Mr. Market in your advantage
Mr. Market is there to serve you. Use volatility in your advantage.
“Market quotations are there for your convenience, either to take advantage of or to be ignored.” – Benjamin Graham
11. Don’t trade too much
The evidence is clear: the more you trade, the less you keep.
The best investor is a dead investor.
12. Costs matter
Every tax and cost you pay will harm your investment results.
Try to minimize costs as much as possible.
“If fees consume more than 1% of your assets annually, you should probably shop for another advisor.” – Benjamin Graham
13. Have good arguments to buy or sell a stock
Never buy a stock because it has gone up or sell one because it has gone down.
Only buy or sell a stock when your investment case has changed or you’ve found a better opportunity.
14. Buy below intrinsic value
The cheaper you can buy a stock, the higher your margin of safety.
Try to buy stocks which are trading at a discount compared to their intrinsic value.
15. Don’t overpay
A great company is not equal to a great investment if you pay too much.
Comparing the current valuation of a company to its average valuation of the past 5 years is a good start.
16. Never speculate
People who invest make money for themselves.
People who speculate make money for their brokers.
17. Embrace price fluctuations
Price fluctuations only have one significant meaning for the true investor……
… they give you the opportunity to buy wisely when prices fall sharply and sell wisely when the stock has gone up too much.
18. Use panic to your advantage
Bear markets and stock market crashes create opportunities.
“The intelligent investor should recognize that market panics can create great prices for good companies and good prices for great companies.” – Benjamin Graham
19. Have patience
When you have a long-term mindset, you shouldn’t worry about daily stock market fluctuations.
The best investors are very patient.
“A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.” – Benjamin Graham
20. Successful investing is about managing risk
Successful investing is about managing risk, not avoiding it.
In the long run, stocks are less risky than bonds.
Here you can find an overview of all 20 rules mentioned:
Benjamin Graham’s book Security Analysis is a must read.
Glen Bradford has published this book for free on his website. You can find it here:
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About the author
Compounding Quality is a professional investor which manages a worldwide equity fund with more than $150 million in Assets Under Management. We have read over 500 investment books and spend more than 50 hours per week researching stocks.
The intelligent investor was the 1st ever book I read in college. So many gems in there!