Comments on A Smart Investor

As a classic of investment, only one or two hundred people scored it. Compared with the score of one or two thousand people similar to Peter Lynch's Successful Investment, it can be seen that its popularity is not extensive.

Peter Lynch's works belong to the style that makes you feel ok after reading them, and the writing is very colloquial, so it is less difficult to read.

Graham's style, on the other hand, is very rigorous and academic. It reads like listening to a professor in a university class (Graham is indeed a professor), and it may be a bit boring and obscure to read. In this book, you will find that Graham will prove any point of view and try not to make any exaggerated, biased or misleading words.

Graham's conclusion is not exciting.

if you want to get a satisfactory investment performance (this satisfaction tends to refer to the returns that are in line with the index), there are relatively simple methods. And if you want to get excellent investment performance (most people want to get excellent returns), it is very difficult.

based on human nature, Graham's conclusion is naturally not very flattering. Although it gives a feasible idea to try to obtain excellent investment performance, Graham's example does not tell readers that this method is a winning strategy, which naturally leads to another disappointment compared with readers who are used to seeking cheats.

However, if we get out of the craze of popular books and look at this book with a realistic attitude, we should find that the book is full of words. In many cases, the author has not given a conclusion and specific methods because there are no fixed specific methods, but only ideas that can be effective for a long time.

on the basis of maintaining long-term reliability, the investment idea given by the author is a guide that can be applied in practice. Under this guidance, investors can develop their own investment methods.

and if you want to make it simpler, the author also gives two investment ideas for defensive investors, which can completely lead to satisfactory investment performance (I'm afraid this satisfaction can't reach most people's psychological expectations).

The reason why this book is called an investment classic is that it abstracts and theorizes the investment theory. Thus, successful investment has changed from a matter that needs to be explored to a matter with specific guiding ideology.

investing is not a simple matter, especially when you want to achieve better results. Chapter 2 "Smart Investors" After reading

For ordinary investors, the income gained by those who invest in funds exclusively for a long period of time (5 years, 1 years) is better than that obtained by those who directly buy ordinary shares.

When opening investment accounts, many people rush to invest for a long time. However, due to the fluctuation of stock prices and other factors, they gradually deviate from the previous principles in trading operations and then become speculators. Irrational blind operation, resulting in huge losses. In contrast, the fluctuation of funds is relatively small, and the cost of each trading operation is higher than that of stock operation. Therefore, investors will make more careful consideration when buying and selling funds, but they will get better returns.

it is easy for the market to produce right? Performance fund? The pursuit of, nearly a week's income, nearly a month's income, nearly a year's income, nearly a year's income ... are generally unstable funds. It is because some fund managers get high returns through short-term radical operations, which are not sustainable, but can enhance the visibility of the fund. In short, when fund managers seek better performance, they usually involve some special risks. The more types of risks, the easier it is for high returns to terminate.

When buying a fund, you should fully understand the various expenses of the fund. The higher the expenses, the lower the return. Like stock trading, the more frequent the fund trading, the lower the chance of making money; When people buy a fund, they first look at the performance, then at the reputation of the fund manager, then at the risk status of the fund, and finally at the related expenses of the fund. And real investors look at it the other way around. Chapter 3 "The Smart Investor"

If you want to succeed in investing in your life, you don't need top IQ, extraordinary business acumen or secret information, but you need a sound knowledge system as the basis of decision-making, and you have the ability to control your emotions so that it won't erode this system.

the market is like a pendulum, always swinging between short-lived optimism (which makes stocks too expensive) and unreasonable pessimism (which makes stocks too cheap). Smart investors are realists. They sell stocks to optimists and buy stocks from pessimists.

The purpose of this book is to guide readers to avoid falling into serious mistakes and establish a set of investment strategies that make them feel safe and secure.

to some extent, the return that investors can expect is directly proportional to the risks they take, which we disagree with. The target rate of return of investors is more determined by the wisdom they are willing and able to pay for their investment; Passive investors who save trouble and pay attention to safety deserve the lowest reward, while those smart and experienced investors deserve the greatest reward because they have paid the greatest wisdom and skills.

if you buy a dollar for 6 cents, you will take more risks than if you only bought it for 4 cents, but the return is higher in the latter case. The greater the potential return of value portfolio, the smaller the risk.

Dow theory? Do well in a certain period, or they seem to be able to adapt to previous statistical records. However, as they are accepted by more and more people, their reliability will generally decline. There are two reasons for this situation: first, with the passage of time, it will bring some new situations that the previous methods can not adapt to. Secondly, in stock market trading, the popularity of a certain theory itself will have an impact on market behavior, thus weakening the long-term profitability of this theory. (So is value investment? )

First of all, stocks protect investors from inflation to a great extent, while bonds can't provide such protection at all. The second advantage of common stock is that it can provide investors with a high multi-year average return; This not only comes from the higher average dividend level of its higher quality bonds, but also comes from the long-term trend of market value rising due to the reinvestment of undistributed profits.

if investors buy stocks at exorbitant prices, these advantages will vanish.

Investment rules of common stock: 1. Be appropriate but not excessively diversified. Your shareholding should be limited to at least 1 and at most 3 different stocks. 2. Every company you choose should be large, well-known and financially sound. 3. Every company should have a long history of paying dividends continuously. 4. Investors should limit the price of their stocks to a certain P/E ratio, and the reference profit per share should be the average of the past seven years.

No matter how the stock price fluctuates, this investment method can make people achieve ultimate success with confidence. So far, there is no investment law comparable to the dollar cost average method.

people tend to extend the concept of risk to the situation that the securities they hold may fall, even if the decline is only periodic and temporary, and they don't need to sell at this time. As far as the real investor is concerned, the drop in market price alone will not lead to his loss; Therefore, the fact that the market may fall does not mean that he faces the actual risk of loss. (risk is the loss of value, including the actual sale of securities, the deterioration of the company's position, excessive purchase price, not volatility)

We have left a lot of room for the choice of common stock, which enables those who have a strong judgment on the risk or attractiveness of the general market level to make a choice.

Any method of making money in the stock market, as long as it is easy to understand and adopted by many people, will be too simple and easy to last.

on wall street, people can't expect anything important to happen again exactly as before.

what we mean by this is that in the long run, it is impossible for most brokerage clients to make money from speculative business. However, if their business is similar to real investment, their return on investment may exceed speculative losses.

securities buyers cannot easily trust the judgment of sellers.

Only when the profitability of an enterprise is higher than the average level can it maintain a high P/E ratio.

We suggest using the concept of margin of safety as the standard to distinguish investment business from speculative business.

We believe that a sufficiently low price can turn the securities with average quality level into a sound investment opportunity. If the buyer knows the information, has certain experience, and can achieve appropriate decentralization. Because, if the price is low enough to provide a large margin of safety, then this kind of securities can meet our investment standards.

does this story have any educational significance for smart investors? An obvious significance is that there are various ways to make money and invest on Wall Street. Another less obvious meaning is a lucky opportunity or an extremely wise decision (can we separate the two? ) the results obtained may exceed the lifetime efforts of a person familiar with the business. However, behind the lucky or key decisions, there must generally be conditions such as preparation and professional ability. People must lay enough foundation and get enough recognition before these opportunities will open to them. People must have certain means, judgment and courage to take advantage of these opportunities.

Generally, people think that mathematics can bring accurate and reliable results, but in the stock market, the more complicated and abstruse mathematics is used, the more uncertain and speculative the conclusion is. Whenever someone uses calculus or advanced algebra, you should be on your guard.