The best book on investing ever written - Warren Buffett
Why has this book become so famous? With a simple and lucid style The Intelligent Investor guides the layman in the basics of investment philosophy. The book aims to enable readers to earn robust and sustainable returns on investments. And that too without resorting to complex mathematical calculations. It's a must-read book for every die-hard value investor.
Indeed, one of the hallmarks of Graham's book is his focus on the concept of margin of safety. He wrote that when a company is available on the market at a price that is at a discount to its intrinsic value, then there exists a 'margin of safety'. That is when investors should consider putting money in the stock of such a company.
Graham was not a fan of predicting the future. Indeed, since the future is highly uncertain, he believed that it was almost impossible to predict trends and how the environment and its consequent impact on companies will pan out. That is why he preferred to rely more on the past record and zero in on companies that were trading at a deep discount to their intrinsic value.
These principles were set on paper 67 years back. The world has changed so much since then.
How relevant are Graham's principles today?
We live in a world where technological disruption is the order of the day and data and information are available at the click of a button. The political and economic landscape of the global economy has also changed substantially. We are now a part of a much more integrated global economy.
In such an environment, are Graham's principles of deep value investing outdated? Not one bit. In fact, they are all the more relevant. You see, Graham's view that the future is unpredictable is valid even today.
Given how technology and doing business are evolving, anyone trying to predict the future is bound to make some errors. Hence, irrespective of the global macro environment, it is all the more important, particularly today, to determine the intrinsic value of a stock and only put money in companies trading at a big discount to this value.
Equitymaster Co-Head of Research Rahul Shah certainly believes in Graham's principles. That is why he and his team launched the Microcap Millionaires service in February 2014 based on the simple rules that Graham laid out and some qualitative criteria of their own.
And here's the icing on the cake...The service has hit the 100% returns mark for the first time since it was launched. This is way, way ahead of the Sensex's 37% during the same period. In fact, Microcap Millionaires even outperformed the 86% returns of the BSE Small-Cap index during the same period.
Here's Rahul:
- You can not go too wrong with a strategy defined by Mr. Benjamin Graham, particularly one that has outperformed the benchmark index since it was back-tested by Mr. Graham himself in the US markets more than 50 years ago.
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