General Value Investing Principles

A summarized list of general Do's and Don'ts based on the writings of Benjamin Graham — Warren Buffett's mentor — and his book, The Intelligent Investor.

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Graham Do’s Graham Don’ts
Always invest with a quantifiable Margin of Safety. Don't speculate. Avoid risky investments.
Invest in Index funds if you don’t have the time for stock research. Most actively managed funds don't keep up with the Indices.
Maintain a 25%-75% distribution between stocks & bonds. Never have a complete stock, or a complete bond, portfolio.
Invest for the long term, for periods of at least a year or more. Don't try to get rich quick, by taking risks or from tips.
Apply intelligent effort. Spend time and energy on research. Minimize trading activity and expenses. Ignore trends and forecasts.
Grow your savings and plan for dividend income. Don't try to earn an income from frequent trading.
Use discount brokers, who work on low fixed rates and high volumes. Full service brokers charge in percentages and work on speculation.
Manage your own money, with a strategy suited to your situation. Letting others manage your money may involve Moral Hazard[1].
Pricing - plan on entering and exiting positions at the right price. Not timing - Never enter at the wrong price, intending to exit at the right time.
Buy stocks like groceries - look for good quality, and value for money. Not like perfume - fashionable names are expensive, and unprofitable.
Be logical, patient and courageous. If your research is thorough, you will be proven right. Don't be emotional. Don’t sell on panic or buy on greed. Ignore the market and its fluctuations[2].
Be an independent thinker. Success depends on correct data and reasoning, not consensus. Don't follow the herd. Successful strategies and stocks are also usually unpopular.
Have a focused strategy. Use adequate diversification to mitigate risk. Don't compromise on quality of research with excessive diversification.
Keep it simple. Use basic arithmetic well. Don't be influenced, or intimidated, by financial jargon.

[1]Since stock markets are considered unpredictable and since financial professionals work with your money, they can take risks with it, lose it, and still get paid. This ability to take risks with no downside is called Moral Hazard.
[2]Graham introduced the famous analogy of a Mr. Market who came to the investor every day with a different price. Sometimes the prices were reasonable. Most of the time, they weren't. Buffett simplified it further by describing Mr. Market as “manic-depressive".

Buffett about Graham

In the 2018 Balance of Power interview for Bloomberg Markets, Buffett says yet again:

"The principles haven't changed at all... It's exactly what Ben Graham wrote in 1949."

Warren Buffett, Bloomberg Markets: Balance of Power (2018).