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The best financial advice on investing that stands the test of time

 A number of sound and rational financial quotes can be found in the book the intelligent investor by Benjamin Graham. The following quote by Benjamin Graham is on the first and probably the biggest hurdle to overcome when starting your investment journey, 

The investor's chief problem - and even his worst enemy - is likely to be himself.

Quote on investing by Benjamin Graham, "The investor's chief problem - and even his worst enemy - is likely to be himself."

Image for representational purpose only. Source - Google Images

In most cases, without a sound foundation people start speculating rather than investing. There might be plenty of people claiming to be experts who insist they have the best advice on where to invest and it might even sound enticing and exciting but it might eventually lead to disastrous outcomes.

While starting my own financial journey, I wish I had come across the following advice which might have saved me a lot of time and money which was wasted on speculative actions like day trading and half-baked analysis based investments in stocks and Mutual funds.

If I had to choose one financial advice which stands out as the best financial quote, it can be found in the commentary section in the book. The following commentary is by Jason Zweig,

“Graham's definition of investing could not be clearer: ‘An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.' Note that investing, according to Graham, consists equally of three elements:
  • You must thoroughly analyse a company, and the soundness of its underlying businesses, before you buy its stock
  • You must deliberately protect yourself against serious losses
  • You must aspire to 'adequate', not extraordinary, performance.”

This cannot be more simple yet more profound at the same time.

The first point reminds us that the stock is not just a ticker symbol to place a bet on like placing a bet on a race horse. 

Rather, there is a legitimate business on ground being run by real people on a daily basis. Their ability to run the business depends on who they are and how rational or grounded to reality they are. How ambitious they are and how much effort they are willing to put into the company. You must know how the company functions and how they have performed in the past and whether that can sustained and built on in the future. For this, you need to keep an eye on the financial results and analyse key numbers and ratios, while keeping it simple but thorough. This will make sure it is not a blind or half baked gamble.

The second point reminds people of how important your hard earned capital is. 

People are so carried away to make more money that they forget about what they have in the first place. This kind of irrational thinking will ultimately lead them to lose what they have as well. Always protect the capital and limit risks as much as rationally possible. Don't be reckless.

The third point reminds us to keep expectations tethered to reality. 

Don't fall for extraordinary promises of returns. The world doesn't magically work according to our expectations. It's the other way around. We have to set expectations based on data available. This way, even if you get more than expected, you know when to exit. When you thoroughly analyse companies and their limitations, it will be clearly visible, how much of an irrational risk people are taking based on delusional expectations of returns.

I highly recommend people to read this book before you pick up investing in life. People say the book is written decades ago but it still has so many financial perspectives that still apply in today's world. One of the most rational books ever written on investment.

If you want to know some key investment insights from the intelligent investor, click here.


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