top of page
  • Writer's pictureIshfaaq Peerally

Most important VALUE INVESTING Lesson from THE INTELLIGENT INVESTOR of BENJAMIN GRAHAM 📚

The markets $SPX500 open a little lower today. As for our portfolio, Parsley Energy $PE missed earnings and is, therefore, 2% down. As for me, I'm satisfied with the earnings with $OIL prices at such prices. The best performer today is Diageo $DGE.L which is up by 1% . $POLY.L also recovers after $GOLD prices rise.

Most important VALUE INVESTING Lesson from THE INTELLIGENT INVESTOR of BENJAMIN GRAHAM 📚

The first time I read The Intelligent Investor of Benjamin Graham, I missed a very important concept of value investing. I was more focused on how to value a company, P/E ratio, P/B ratio and the Graham number.

There are two types of investors: Defensive investors and Enterprising investors. It is very important for you to know which one you are. You can't be both at the same time. It was not such an issue for me when I read the book for the first time since I knew for sure that I was going to be an enterprising investor. But most people should not be enterprising investors. You can beat the market if you are defensive investor although an enterprising investor seeks higher return. The problem is when you try to be both. That's when you lose money.

Being an enterprising investor demands a lot of work. I do this full time researching companies and sectors for over 80 hours a week. Most people cannot do this and, therefore, should only be defensive investors. Being a defensive investor means that it is automatic for you, you just invest and once a year, you check your portfolio to make some changes. According to Benjamin Graham, a defensive investor has a portfolio of bonds and stocks, both of which should be of very high quality. I won't advice you to have such a portfolio right now because of the low interest rates. The best thing to do is to have an all weather portfolio like the one proposed by Ray Dalio. You can also invest in mutual funds but make sure that the managers are value investors. Investing in Warren Buffett's Berkshire Hathaway $BRK.B is not a bad idea. On eToro, you can copy value investors. There are so many options available today.

An enterprising investor doesn't take more risk than a defensive one. They just invest more time in research. They are reading 10-Q and 10-K forms. They are listening to conference calls. They are reading hundreds of books/articles about investing/economy a year. They have a larger pool of stocks. A defensive investor will look at only a few big companies, let's say the 100 largest US companies. An enterprising investor have a pool of over 10 000 stocks from all over the world. The enterprising investor can aim for 15% or even 20% returns a year depending on how much time they can invest in research. However, the concept of value investing doesn't change at all.

There are different types of enterprising investors. You don't just need to buy and sell stocks. You can be an activist investor like Carl Icahn. An activist investor buys stocks and tries to influence the management. He pressured eBay $EBAY to spin off PayPal $PYPL . Benjamin Graham used to owned 50% of Geico and was even chairman of the company at some point. You can also do arbitrage trades as an enterprising investor. This is something that I do. I'm doing this with Allergan $AGN awaiting a merger with AbbVie $ABBV . Warren Buffett did an arbitrage trade on the Red Hat - IBM $IBM deal and the Monsanto-Bayer $BAYN.DE deals recently. You can also do cigar butt investing like I'm doing with GameStop $GME right now.

Let's say you want to invest $100 a month for 50 years.

1. If you just save, you will have $60 000 after 50 years

2. If you invest in the S&P 500 $SPX500 , with an average return of 10% p.a, you'll have $1.5 million

3. If you are a defensive investor and aim for 11%, you will have $2.1 million

4. If you are enterprising investor aiming 15%, you will have $9.2 million

5. If you aim 20%, that's what I'm doing, you'll have $59 million.

Compound interest and value investing itself works for both enterprising and defensive investors. It is all about time and effort and not at all about risk.

Watch the full video on YouTube and don't forget to subscribe:

https://www.youtube.com/watch?v=06MQa7Di6Rg&list=UUPO3uUyoXSaFWG-Ldq1mqEQ

Join my private investing group on Facebook for more:

https://www.facebook.com/groups/IshfaaqInvesting/

For more detailed analysis, have a look at my partnership:

https://ishfaaqpeerally.teachable.com/

1 view0 comments
bottom of page