5 Money Tips From Me To You

1) What gets tracked, gets done. If you’re not tracking your money, you’re losing. Like going to the gym, if you’re not writing down how much weight you pushed and for how many reps, you’ll have no idea how much you need to do to progress.

2) You are your best resource. Acquire the skills you need to do your own research and analysis on companies without blindly taking advice from others.

3) Money should always be working for you. Your dollars are your employees and you’re in charge. Put them in places where they’ll give you the highest ROI and don’t forget, dollars can work around the clock. Humans can’t.

4) Short-term news means nothing if you’re a long-term investor. Turn off market news notifications. Ignore the fear-mongering. Keep a long-term vision. Price fluctuations over the course of a few weeks/months shouldn’t even make you flinch.

5) Pay yourself first. Every time money gets deposited in your account, allocate a percentage to your investing account before you pay your bills. If you’re constantly paying everyone else first, you’ll be left wondering where all of your money went at the end of the month.

The Intelligent Investor - Benjamin Graham

One of my favourite finance books of all time. I’ve read this book 3 times over and every time, I pick up on new nuggets of timeless advice that I carry with me throughout my investing journey.

In today’s post, I’m going to be highlighting the top 5 lessons within The Intelligent Investor and why you should consider picking up a copy of this book.

Background

The Intelligent Investor, written by Benjamin Graham, was first published in 1949 and has been known as the “Bible of Investing”.

It’s a classic within the finance world and has provided guidance and inspiration to a number of successful investors, including Warren Buffett himself.

Today, I’ll be sharing 5 of the best lessons I learned from Graham’s book.

Lesson 1: Margin of Safety

One of the cornerstones of “value investing”, which is a hot topic within the book, is buying assets with a margin of safety.

This means purchasing stocks for a price that is lower than their intrinsic value, providing you a cushion against any potential losses.

As they say, everyone knows the price, but not everyone knows the value.

By figuring out the value, you can determine if there is a margin of safety large enough to justify the purchase.

Lesson 2: The Difference Between Investment and Speculation

There is a big difference between investment and speculation, an important topic in Graham’s book.

An investment is made based on in-depth analysis and the expectation of future profits.

A speculation is made and driven by emotions, and the hope for potential quick gains. We can also call this "gambling”.

To become a successful or “intelligent investor”, we must refrain from buying assets based on speculation, and rely on a more logical and mathematical approach.

Only then are you able to fully push your emotions off to the side and eliminate them from the equation.

Lesson 3: Mr Market

Mr Market is a fictional character that represents the stock market’s daily fluctuations.

Within the Intelligent Investor, Graham highlights that Mr Market can often be highly irrational, with stock prices that may not accurately reflect the stocks true value.

Graham highlights that as investors, we should be taking advantage of Mr Market’s mood swings by buying stocks when prices are low and selling them when prices are high.

Lesson 4: Diversification

The Intelligent Investor stresses the importance of proper diversification within an investment portfolio.

Diversification can help reduce the impact of a single poor-performing investment on the entire portfolio.

Graham suggests that the best way to strike a balance between diversification and returns is to allocate funds in accordance with your risk tolerance and investment goals.

For example, an investor with a higher risk tolerance may have a more concentrated portfolio of 3-5 stocks while an investor with a lower risk tolerance may choose to own more holdings across a wider variety of industries.

Lesson 5: Dollar Cost Averaging

The value of dollar cost averaging is unmatched and it suggests that investing a fixed amount of money in the stock market, regardless of what the market is doing that day, results in purchasing shares both when prices are high and low to balance out volatility.

If you have trouble with contributing to your account, this is a great strategy to ensure you stay on track.

I would suggest automatic contributions and purchases every week. Let technology do the heavy lifting for you.

See you in the next one!

Alex (The Dividend Dominator)
Founder and CEO of Dividend Domination Inc.
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