4 Timeless Investing Concepts
Every successful investor should study timeless investing concepts.
These concepts have withstood the test of time, and I mean decades.
Here are four timeless investing concepts you need to know:
1) All Intelligent investing is Value Investing
Regardless of what you invest in, you are essentially buying an asset at a price that is lower than its worth.
All good and intelligent investing is value investing.
2) Mr Market is Your Servant, Not Your Guide
Mr Market analogy was coined by Benjamin Graham, the pioneer of value investing.
Mr Market is an imaginary person, who knocks on your door every day to ask you, "Hey, do you want to buy or sell your stock today?".
When in a good mood, he will be excited about the business prospects and quote you a HIGH price.
When he is upset, he will be pessimistic about the business outlook and will quote you a LOW price.
But price is different from value.
And more importantly, Mr Market is indeed the stock market - it's made up of human who have emotions (and we are not as rational as we would like ourselves to be).
Never let Mr Market’s opinions dictate what you should do.
When he is irrational, you can take advantage of his mood swings because there is a gap between the market expectations and the true business potential.
You have control over the market, don’t let the market control you.
3) Always Invest with a Margin of safety
It's impossible to get it all right when you are talking about the future of a business.
Because there are risks that you are not aware of.
That is where the concept of margin of safety comes in hand.
It offers you downside protection (i.e. prevents you from losing money).
"In the short run, the market is like a voting machine — tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine — assessing the substance of a company."
Investing is a long-term game.
Never interrupt the power of compounding unnecessarily.