THIS is Warren Buffet’s favourite book

Sep 5, 2024

Aakanksha Sharma

​Warren Buffet

Warren Buffet, a name synonymous with wisdom, wealth, and wit, is considered to be one of the most successful investors in history. People from all over the world, and all walks of life look up to him as a mentor and he shares his knowledge through conferences and meets.

His book recommendation

At a conference a few years ago, Warren Buffet talked about a book that he considers one of the best books on investing. He was talking about ‘The Intelligent Investor’ by Benjamin Graham.

​His words about the book

Buffet once also said, “I read the first edition of this book early in 1950 when I was 19. I thought then that it was by far the best book about investing ever written. I still think it is.”

​What is it about?

The focal point of ‘The Intelligent Investor’ is the principle of value investing. Benjamin Graham advises investors to buy stocks that are priced below their usual value to create a strong portfolio.

​The process

To do so, one needs to assess and find companies whose stock prices are undervalued by the market but have strong fundamentals. By learning from growth charts, people will be able to buy stocks in the early years and then reap the benefits of their boom later.

​Safety margin

One of the most important concepts Graham talks about is the ‘margin of safety’. It says that investors need to buy securities at a price well below their calculated value. The difference between ‘well below’ and ‘usual’ helps you stay on the safe side.

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​Investment vs Speculations

Graham also says that when you carefully assess, analyse, read, learn, and follow a stock for quite some time, and then place your bets, it is an investment. And anything other than this is purely speculation, which is dangerous.

​A diverse portfolio

One should never place all their bets on the same pool. And so, diversification is important. Graham says in his book that by spreading investments across assets, investors can reduce the risk and impact of loss.

Ups and downs in the journey

Graham also introduces the concept of ‘Mr. Market’, an imaginary figure who is irrational and often driven by emotions like fear and greed and does not analyse and plan his investments.

Don't follow the crowd

One of the book’s most important lessons is that don't give in to the herd. Instead of following the crowd and getting caught up in market trends, do your research, study for yourself, and then invest wisely.

Think long-term

Value investing should not be treated like a fling and one should try to not give up immediately. Graham believes that success in the stock market comes from patient, disciplined investing over many years.

Thanks For Reading!

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