The Intelligent Investor

How do you choose funds and stocks, investment and speculation, have you figured it out?
#The first method: trading in waves
That is, you buy at a low point when the stock price starts to rise, and then sell it at a certain high point to earn the price difference.
#The second method: operating based on news
Pay attention to financial news, online articles, or so-called "inside information" every day, and analyze whether they are positive or negative for the market. If it's positive, buy quickly and wait for the rise; if it's negative, sell quickly and wait for the price to drop before buying back.
#The third method: betting on trends and holding long-term
For example, now everyone says that new energy, chips, and artificial intelligence are the big trends of the future, so they buy stocks in these fields, preparing to hold them long-term and wait for appreciation. Here, many people think they are doing value investing, but the question is, are these methods really reliable? Graham believes that for ordinary investors, they may not work well! There is nothing wrong with the methods themselves, and many professional investors and institutions also use these methods to make money. But the problem is that these seemingly simple three methods actually have extremely high thresholds, and ordinary people basically cannot handle them. For example, when trading in waves, can you really catch the right timing every time? The market changes rapidly, and no one can accurately predict the rise and fall. Most people rush to buy after seeing the stock market rise for a few days, only to be trapped at high positions or sell in a panic when it falls, missing the rebound opportunity.
The second method of operating based on news is actually more suitable for professional investment institutions because they have faster and more comprehensive information channels, as well as professional teams to research and interpret. For ordinary investors, by the time the news reaches our ears, it is often already lagging, and the market has already reacted. So trying to make money based on information is most likely a futile effort.
The last method of betting on trends, Graham said that even if you see the big trend correctly, you may not necessarily make money! In the 1950s, everyone thought the aviation industry would flourish, so fund managers frantically bought airline stocks. Later, the industry did develop, but due to overcapacity and fierce competition, airlines had thin profits, and the entire industry generally suffered losses. Investors actually lost money! These methods may still have a slight chance of success when used by professional investors. But for ordinary people, the difficulty is too high. Those who have made money using them are mostly relying on luck, but many people mistake this luck for their own ability, confusing speculation with investment.
Graham believes that real investment must be based on analysis, an understanding of the company's business, ensuring the safety of the principal, and pursuing appropriate returns on this basis. If safety and returns cannot be achieved at the same time, safety should come first. On the contrary, those who buy just because others say it's good (maybe they don't even know what the company they're buying does) and only pursue high returns without paying attention to the fundamentals are speculating. But because the word "speculation" doesn't sound very honorable, many people in the capital market today, even some professional institutions, like to use the word "investment" to cover up their speculative behavior. Graham said that most people lose money because they only focus on the rise and fall of stock prices and lack understanding of the company! They turn investment into gambling, winning by luck and losing as the norm.
You might as well test yourself: if the exchange closes tomorrow, can you still recover your principal from your stocks? Similarly, in real estate investment, if the house can no longer be traded, can you recover the cost? Those who can answer these questions are investors; those who cannot are speculators. And among speculators, 90% will eventually become "leeks" (losers). So how can we become smart investors?$NVIDIA(NVDA.US) $Tesla(TSLA.US) $Meta Platforms(META.US)