The basic principles of Graham

Warren Buffett is considered one of the greatest investors of all time, but if you have to ask who is the greatest investor he would probably mention one man: his teacher, Benjamin Graham. Graham was an investor and teacher who is considered the father of security analysis and value investing.
In this article, we will summarize the basic principles of Graham and give you a head start in understanding its philosophy.

Principle 1: Always Invest with a margin of safety
A margin of safety is the principle of the purchase of the security at a time when the price is considerably lower than its intrinsic value, which is believed will provide not only a high return, but also to minimize the risk of the investment. In simple terms, Graham's goal was to buy assets worth $ 1 for 50 cents. It makes it very, very well. This concept is very important for investors to pay attention, because value investing can provide substantial profits as undervalued assets will inevitably have ups price to fair value.

Principle 2: Expect Volatility and Profit from It
Investing in stocks means dealing with volatility. Instead of waiting for time to pass the turmoil, the smart investor greets downturns as chances to find position. Moreover, it should only buy when the price offered makes sense and sell when the price becomes too high. Put another way, the market will fluctuate - sometimes wildly, but should not be afraid of volatility, but to use it to their advantage to get bargains from the market or to sell when your holdings become way overvalued.

Principle 3: I know what I'm investor
Graham recommends investors to know the nature of investment. To illustrate this, he makes a clear distinction between the different groups operating on the stock exchange.
Active or Passive
Graham posocheva active and passive investors as "enterprising investors" and "defensive investors."

You have only two real choices: The first choice is a cover or contribute to a serious commitment in time and energy to become a good investor who equates the quality and quantity of practical research with the expected return. If this is not your cup of tea, then you are passive and be satisfied with (presumably lower) profitability, but with much less time and work. Graham turned the educational concept of "risk = return" on its head. For him "work = return." The more work you put into your investments, your return should be highest.

Graham was the first great teacher on investment discipline and its main ideas are timeless and essential for long-term success. It brings understanding to purchase fin.instumenti on Graham continues to prove its rightness by his disciples, like Warren Buffett, which has become a habit "to beat the market."