‘The Intelligent Investor’ is an authoritative book on investing written by Benjamin Graham, which Warren buffet calls ‘the Bible of investing’. We can get many invaluable nuggets of wisdom from it about how to build wealth. If you are serious about becoming a successful investor, then you must read this book.

Here are the top 5 great learnings that you can get from ‘The Intelligent Investor’.

1. Defensive Vs Aggressive Investor: as per Mr Benjamin Graham there are 2 types of investors in this world:

Defensive investor: They always try to protect their fund value, since they understand that if they do not lose money, their money will ultimately grow.

Aggressive investor: They earn high returns by taking high risks.

Graham says that in the long run the defensive investor always wins since he earns small amounts multiple times, but rarely lose money. On the other hand, since aggressive investors take high risks, they lose big amounts which they find difficult to recover.

For example, if they lose 50% of their capital in any investment then they must earn 100% profits in the next investment just to recover their losses. This is almost impossible.

Mr Graham, therefore, suggests that we should be defensive investors and focus on investing in large-cap companies or funds which are safer.

2. Mr Market: Mr Market is the nickname given by Graham to the share markets. He says that Mister market is driven by emotions.

There are times when Mr Market is buoyant, and you will find lots of shares trading at remarkably high prices. Many investors end up buying shares at those high prices. Later when Mister market turns depressed and the share prices start falling, they end up selling so shares at incredibly low prices, incurring heavy losses.

Graham says that investors need to understand how to handle these emotions properly. When Mr Market turns aggressive, we should sell the shares and then buy those shares back when Mr Market gets depressed.

3. Margin of Safety: Graham says that we should maintain a margin of safety in any share that we buy.

For example, if a share is valued at ₹100 and we can buy it at ₹80 then we have a margin of safety of ₹20. Tomorrow if the price goes up to ₹100 and then the market crashes, we will still have a cushion of ₹20 before we make any losses.

4. Avoid IPOs: Graham says that in every IPO the investor buys shares from the promoter. Since the promoter will always sell the shares at a premium, the investor will always get the shares at higher prices. Therefore, it is always better to avoid IPOs and buy shares from another investor where the prices will be fair.

5. Enterprising Investor: As per Graham, any enterprising investor must have the following qualities:

1. Patience
2. Discipline
3. Eagerness to learn
4. Willingness to spend time.

If you understand and follow these principles, you can become an intelligent investor yourself.