Sunday, March 05, 2006

The investment framework

Though many people have tried to come out with their "investment strategies", I still find the principles in Ben Graham's "The Intelligent Investor" the most true and simplest:

  1. Think of a stock as a business not “things that wiggle around” (Chapter 8);
  2. let the markets serve you, not instruct you (also in Chapter 8);
  3. buy with a margin of safety (Chapter 20)

“Those three concepts are really all I know about investing,” Warren Buffett once said. “I’ve built everything on that structure. Those were the ones that applied in 1949, those are the ones that still apply today and will apply 100 years from now.”

Graham’s book was to Buffett as Buffett’s letters in his annual reports are to his shareholders: The framework.

And Graham was to Buffett as Buffett is to his followers: The teacher.

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