I have a plan for you to (almost) make sure of profits when you are investing in the Stock Markets. But be warned – this advice is coming from a person who quit the Markets more than 10 years ago and who is flat broke.
So how can I expect to guide you to profits in the Stock Markets? Keep reading and you will learn. I will not waste your time I promise.
Two people whose advice is respected the most when it comes to investing in stocks are Warren Buffett and Benjamin Graham. Benjamin Graham almost pioneered the art and science of Fundamental Analysis and Value Investing. And his most celebrated pupil is Warren Buffett. Mr. Buffett has been appearing in the list of the wealthiest people in the world for decades now and is a multi-billionaire as all of you must be knowing.
Two classic books that Mr Graham wrote are The Intelligent Investor and Security Analysis. If you are a beginner to investing I would advise you to start with The Intelligent Investor. This book – according to Mr Buffett – gives a complete intellectual framework for investing in stocks. Start and wet your feet by buying a few stocks based on the method you have learnt. If you enjoy the journey and make some money you can read Security Analysis which is a much more comprehensive book.
Warren Buffett wrote the foreword to The Intelligent Investor and there is one sentence in the Foreword that is the key to making money in Stocks or business. This one sentence is worth the price of admission and gives you the key to predicting whether or not you will make money in Stocks or in business.
The key concept is (according to Mr Buffett) – Emotional Balance.
The Intelligent Investor will give you the intellectual framework but you need to combine it with a balanced emotional approach. If you are not a stable person emotionally then no amount of intellectual guidance will help you. You will lose money in the Stock Markets or in business.
You already have a plan. The Intelligent Investor has given you one. But to stick to that plan for months, years and decades – through good times and bad times – takes some doing.
I am speaking from experience. I made money in Stocks by reading Graham and also another excellent book, One Up on Wall Street by Peter Lynch. But I lacked the stability that Buffett spoke about. So even though I had made profits I lost confidence in Graham and tried another approach to investing and made heavy losses in the times that followed.
In fairness to myself – there was a logical reason to my trying out a different approach. But the reason did not apply to the circumstances prevailing in the Market at that time.
The military classic, The Art of War by Sun Tzu says – If you know neither the enemy nor yourself, you will succumb in every battle.
So, this is my advice to you before you buy stocks. Do a ruthless analysis of yourself and your character. Ask elders and people whose judgment you trust to help you in this. There can be nothing more important than this before starting a career in investing or in business.
You must know yourself and the enemy before you do battle.
I have given Benjamin Graham and Warren Buffett almost unqualified praise and they deserve it. But I would add this Caveat. These methods will work in a bull market which lasts for years and decades. If there is a long bear market like there was in the 1930s then no amount if intelligent investing will save you from losses.
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