Warren Buffett has used this investment strategy to make millions; you should too

Warren Buffett is a household name for a reason; he’s insanely wealthy.

He is also irrationally obsessed with markets, financial news and stock picking.

There’s a lot about Buffett I love and a lot I think is a bit weird.

But the inspiration he had from Benjamin Graham, and the investment strategy he learnt from Ben, is priceless.

It’s a testament to the timelessness of financial wisdom that, decades after its original publication, Benjamin Graham’s “The Intelligent Investor” remains an essential read for those seeking insights into investing.

If you haven’t read it, I recommend it.

If you don’t have time, I don’t blame you.

Luckily for you, this article delves deeper into the principles Graham championed, explains how they made Buffett his millions, their relevance today and how you can benefit from them.

Who was Benjamin Graham?

For those unfamiliar, Benjamin Graham (1894–1976) is often dubbed the “father of value investing.”

A mentor to the likes of Warren Buffett, he formulated an investment approach rooted in rigorous analysis and grounded logic, challenging speculative market behavior.

His teachings have left an indelible mark on the world of finance, promoting a philosophy that prioritizes long-term value over short-term market trends.

“The Intelligent Investor” at a Glance

Published in 1949, “The Intelligent Investor” has often been hailed as the best book ever written on investing.

I vouch for that.

Despite it’s slightly dated language.

What I love about it is that it doesn’t sell the dream of quick riches or game-changing stock picks.

Instead, Graham advocates for a disciplined approach.

Something which we, at Fill the Gap, certainly advocate for too.

So, without further ado, let’s get into 5 actionable lessons that you can take away from the Intelligent Investor to make you more comfortable and confident when you’re investing.

1. Distinguish Between Investing and Speculating

• Action: Prior to every investment decision, take a moment to reflect. Are you making a choice based on thorough analysis or just a hopeful hunch?
• Deep Dive: Graham strongly believed in the power of analysis over emotion. He viewed speculation as a gamble, whereas investing meant committing funds with an expectation of suitable returns after thorough research.
• Tip: Cultivate the habit of asking “Why?” every time you consider an investment. If you can’t list tangible reasons grounded in research, think twice.

2. Adopt Dollar-Cost Averaging

• Action: Allocate a fixed dollar amount to invest at consistent intervals, regardless of market conditions.
• Deep Dive: By investing regularly over time, you reduce the risk of buying high and selling low. This method smoothes out the average cost of your investments. And it takes the mental strain and struggle out of investing. You just have an auto-deposit coming out of your bank each month into a tracker fund (e.g., MSCI world) and sit back and relax. Go walk the dog.
• Tip: Automate your investments. Many online platforms offer auto-invest features to help maintain this discipline.

3. Embrace Bear Markets

• Action: Anticipate market downturns and prepare both mentally and financially.
• Deep Dive: For Graham, bear markets weren’t a calamity but an opportunity. It’s during these times that his character of the book Mr. Market’s pessimism often offers stocks at a discount. When the market turns, keep investing. You’re getting stocks at a cheaper rate that will give you bigger returns in future when they begin to grow again and the market builds.
• Tip: Stay calm during market downturns. They’re natural and cyclical. Keep an eye out for valuable stocks that may now be available at a bargain.

4. Stay Educated and Informed

• Action: Make ongoing financial education a priority.
• Deep Dive: The investment landscape is always evolving. To stay ahead and make informed decisions, it’s crucial to continually educate yourself. Read blogs, books and listen to podcasts. Just an hour a week or 2 hours a month will do you good.
• Tip: Set aside time each week to read financial news, articles, or books. Consider joining investment clubs or online forums.

5. Regularly Review and Adjust

• Action: Revisit your portfolio at set intervals, ensuring your investments align with your goals and risk tolerance.
• Deep Dive: An intelligent investor is always vigilant. Over time, some assets may outperform others, leading to an imbalance in your portfolio. Although with our approach, you should only have a few index funds in your ISA’s holdings, so you probably won’t need to do too much.
• Tip: Aim to review your portfolio semi-annually. If certain investments have done particularly well, consider rebalancing to maintain your desired asset allocation.

Starting your investment journey rooted in Benjamin Graham’s principles offers a strategic advantage.

His wisdom, emphasizing diligence, patience, and education, remains as relevant today as ever.

It has worked for Buffett all these years, and has worked for countless other investors too.

If you want to be comfortable and confident with your money, take heed of Graham’s words.

Happy and wise investing.