The Intelligent Investor

Core lessons

The 8 Fundamental Lessons

1. Lesson 01

   The market is not your advisor. It is your servant.

   Practical application

   Never make a decision because the market went up or down. Make decisions based on whether the price being offered is significantly above or below what the business is actually worth.

2. Lesson 02

   Price and value are two completely different things.

   Practical application

   Before looking at a stock price ask yourself what this business would be worth if it were private and not traded on any exchange. That number is your anchor. The market price is just an offer you can accept or reject.

3. Lesson 03

   The Margin of Safety is the only rule that truly matters.

   Practical application

   Never buy anything at its calculated intrinsic value. Always require a discount. For a business you understand deeply 20 to 25 percent is reasonable. For something more uncertain you want 40 to 50 percent.

4. Lesson 04

   Know which type of investor you are before choosing any strategy.

   Practical application

   Be honest about which type you are before choosing a strategy. Most people think they are enterprising investors but behave like defensive investors with worse results.

5. Lesson 05

   In the short term the market votes. In the long term it weighs.

   Practical application

   When a great business you own falls because of temporary negative sentiment that is usually a reason to buy more. When a mediocre business rises sharply on positive sentiment that is usually a reason to reduce your position.

6. Lesson 06

   Inflation is the investor's permanent and silent enemy.

   Practical application

   Always think in real returns not nominal returns. A 7% return in a 6% inflation environment is a 1% real return. A 10% return in a 2% inflation environment is an 8% real return. The second is dramatically better even though the nominal difference is only 3 points.

7. Lesson 07

   The history of markets is your best protection against panic.

   Practical application

   Before your first serious investment spend time reading about every major market crash in history. Not the numbers but the stories of what people felt and did. That knowledge is worth more than any valuation model when the market drops 40%.

8. Lesson 08

   Patience is the investor's primary and most durable competitive advantage.

   Practical application

   Build a watchlist of businesses you understand and have valued. Then do nothing until the market offers a price that represents a significant discount to that value. The waiting is not inactivity. It is the strategy itself.

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