When it comes to investing, the most successful approach is one that mirrors the way great entrepreneurs run their businesses: with discipline, clarity, and a deep understanding of the risks and rewards.
Too often, even highly capable businesspeople abandon their usual good judgment when they enter the world of investing. They chase trends, take uncalculated risks, or trust others blindly, behavior they would never accept in their own companies. But if you treat every investment like a business venture, and apply sound business principles, your odds of long-term success increase dramatically.
These principles were brilliantly laid out by Benjamin Graham in The Intelligent Investor, a book that has shaped my philosophy more than almost any other. If you haven't read it yet, I strongly recommend you do. It's one of the most powerful, practical, and timeless guides to approaching investing with real intelligence.
Here are three core principles from that masterpiece:
1. Know What You’re Doing
Before you invest in any asset, understand it as thoroughly as a business owner would understand their own product. Don’t expect to consistently earn above-average returns—like dividends or interest—unless you genuinely understand what drives the asset’s value. If you wouldn’t feel confident pricing and selling it yourself, think twice before buying.
2. Don’t Hand Over the Keys
Never put your capital in the hands of someone you don’t fully trust or can’t monitor. Either stay directly involved and understand what’s happening, or have an exceptionally strong reason to trust the person managing it. Blind faith is not a strategy—it’s a risk.
3. Demand a Margin of Safety
Only commit capital when the numbers make sense—when careful analysis shows there’s a good chance of earning a solid return. Avoid investments that offer high potential gains but come with high risk of loss. Whether it's a bond, a dividend stock, or a private venture, make sure there’s a cushion protecting your principal.
Good investing isn’t about excitement or speculation. It’s about applying solid, businesslike thinking to every decision you make. If you wouldn’t take a wild gamble with your company, don’t do it with your portfolio.
📘 If this mindset resonates with you, read The Intelligent Investor by Benjamin Graham. It’s not just a book, it’s a roadmap to financial wisdom. I’ve read it multiple times, and every time, I come away with something deeper.