Saturday, January 13, 2007

The Importance of Investing

Benjamin Graham, the father of value investing, taught Warren Buffett that “Investment is most intelligent when it is most businesslike”. Buffett acted on this philosophy and today he is the second richest man in the world. You too can become rich by following this wisdom.

“Investment is most intelligent when it is most businesslike”. Commit this to your memory; it will do you a world of good.

It is extremely important to know the difference between “to invest” and “to trade”. While the former is the road to riches, the latter is the way to ruin...

To invest in the stock market means to exchange your money for equities that promise safety of principal and a good dividend yield, after careful investigation. To trade is more akin to gambling. It goes after the price instead of the value. Buying and selling in short period of time (usually within a month), traders hope to make quick gains by riding with the trend. Many have failed and many more will find that trading does not pay in the long run.

The stock market is a marathon, not a sprint event. Safety of principal is your first priority. If you cannot cut losses quickly, follow the rules of Warren Buffet. His number one rule is: Never lose money. And his number two rule is: Always remember rule number one.

If you do not want to lose money, you must make absolutely sure that every buy of yours is a value buy. That means buying sound, solid and well-managed companies, after through research, at rock-bottom prices at all times.

Think intelligently and buy wisely. You need to be smart from the start.

Good luck and all the best.