Investing is a smart financial habit to adopt in 2023, but it can be intimidating to get started. Fortunately, personal finance expert Graham Stephan has shared 10 investment principles from the classic book, The Intelligent Investor by Benjamin Graham.
Whether you’re a beginner or have some investing experience, these tips can help you build wealth over time.
Start Early and Focus on Intrinsic Value
One of the most critical things to do is start early. The earlier you start investing, the more time your investments have to grow. Another key tip is to focus on intrinsic value, which refers to the actual value of a company rather than its current stock price.
Diversify and Invest for the Long Run
Another principle of successful investing is diversifying your portfolio. Don’t put all your money into a single company or industry. To ensure diversification in your portfolio, it is recommended to include a minimum of 25 to 30 stocks.
Additionally, it’s crucial to invest for the long term. The most successful investors make decisions based on the fundamental value of a business and avoid speculation.
Avoid Market Timing and High Fees
Market timing is a risky strategy, and it’s difficult to predict when the market will go up or down. Additionally, high fees can eat away at your returns over time. Instead, consider investing in low-cost index funds.
Do Your Own Research
It’s important to do your own research and not rely solely on tips and advice from others. While advice can be helpful, it’s essential to understand the risks and rewards of your investments.
Open an Account with a Top Stock Broker
If you’re new to investing, opening an account with a top stock broker is a good starting point. These platforms offer access to a range of investment options and educational resources.
Understand Your Risk Tolerance
Understanding your risk tolerance is crucial for successful investing. It’s important to invest according to your comfort level, rather than making emotional decisions that could cost you money in the long run.
Emotional Decisions Can Be Costly
When it comes to investing, emotional decisions can be costly. Panicking and selling during market downturns can lead to significant losses. Being able to maintain composure is a valuable trait for investors.
Stock Prices May Not Always Behave Rationally
Investors should also be aware that stock prices may not always behave rationally. A growing company doesn’t always equate to growing stock prices, and stock prices may not perfectly follow the growth of a company.
Be a Long-Term Investor
The market tends to act like a voting machine in the short run. Price fluctuations depend on current market sentiment and don’t always reflect a company’s true value.
Over the long term, fundamentals matter more than short-term sentiment. It’s best to be a long-term investor to take advantage of the weighing machine effect.
Avoid Losing Money
The primary goal of the intelligent investor is to avoid losing money. Trying to hit a home run is difficult and puts you at greater risk of losing money. Losing money makes it harder to recover financially.
Finding Good Companies and Value
Finding good companies is important for successful investing. Determining whether a company is a good value in relation to its price is equally important. Both the company and the price have to be right for a stock to make sense as an investment.
So, investing is a smart financial habit to adopt in 2023, and personal finance expert Graham Stephan has shared ten investment principles from the classic book, The Intelligent Investor by Benjamin Graham, that can help investors build wealth over time.
By following these principles, investors can make informed investment decisions and achieve their financial goals.
