Warren Buffett's philosophy
Introduction
I started my journey in investing at the young age of 11 and dabbled in the stock market until I was 19. My approach was far from disciplined and I was chasing charts, trends and anything that I thought would make me a profit. However, my method was profitless but it was a lot of fun.
The Discovery of The Intelligent Investor
In 1949, I stumbled upon the book "The Intelligent Investor" by Ben Graham and it was a game changer for me. The book set my philosophical framework for investing in three fundamental ways. The two chapters in the book were the key to my investment journey and the simple yet powerful ideas have stayed with me to this day.
A Stock is Part of a Business
The first key idea I learned from the book was that a stock is part of a business. I used to view stocks as little ticker symbols but after reading the book, I started to see them as businesses. It was important for me to understand the economic characteristics of the company, who its competitors were, and what kind of management it had. This information helped me value a business rather than just look at a little ticker symbol.
Mr. Market and Investor Attitude
The second key idea in the book was the concept of Mr. Market and how an investor should react to stock market fluctuations. Ben Graham introduced the mythical Mr. Market as an obliging partner in investing. He represents the daily stock price changes in the market and offers to either buy or sell your stake in the business. However, Mr. Market is an alcoholic, manic depressive who can be unstable and name crazy prices. The idea is that as an investor, you don't have to pay attention to Mr. Market's prices unless it's to your advantage to do so. You can simply sit and wait for the right opportunity to buy or sell.
The Remarkable Nature of Stocks
Stock prices tend to fluctuate over the course of a year and can often be unpredictable, but with the right knowledge and strategy, they can be a lucrative investment option. stocks are typically more volatile than other assets, but they also have the potential for higher returns over the long term. This is why it's essential for investors to have patience, as the stock market often requires a long-term perspective to see significant growth. A well-diversified portfolio can help mitigate the risks associated with stock investing, and a focus on quality companies with strong fundamentals and good growth prospects can also improve the chances of success.Conclusion
The ideas I learned from "The Intelligent Investor" have stayed with me throughout my investment journey. I went from being a young ticker symbol-chasing kid to a philosophical investor who understands the value of a business and knows how to navigate the ups and downs of the stock market. The book set me on a path of disciplined and successful investing and I am grateful for the knowledge it has given me.