"The Intelligent Investor" by Benjamin Graham: 6 - Portfolio Policy for the Enterprising Investor: Negative Approach

Dear Steemians,

I have written the following summary for Chapter 6. This chapter reminded me of all the mistakes I made during the bull market of 2017 and my illusion that day trading is the way to go, the prices will always keep going up, and investing in Cryptocurrencies is like investing in Google and Microsoft since their birth. I will cherish these timeless pieces of advice to hopefully eliminate my losses in the future. I hope you all learn from these too.

The aggressive investor by Graham’s definition does not have more risk involved, but spends more time to create and maintain his portfolio. This chapter is written for the aggressive investor. We discover the list of don’t from Graham’s perspective as eliminating mistakes are more important than making profits.

Junk bonds:

Graham makes a valid point for the aggressive investor to protect itself from the risks of bond defaults. Increases in interest rates are highly threatening to these high risk debt obligations and should only be considered as a minor option for the intelligent investor. It is always recommended not to invest in bonds only for its yield. As all other investment decisions the fundamentals of the underlying business are the most important aspects of bonds. Graham encourages the readers to stay away from second grade bonds and only invest in high quality bonds.

Trading:

Graham believes the best weapon for financial suicide is day trading. When you add up the panic sells and buys with market orders, trading fees, and taxes associated to day trading it is simply unheard of for an average person to beat the market. You would need to make 10-15% on every trade just to break even!

Initial Public Offerings (IPO)

It is known that IPOs are mostly offered during good market conditions. From June 1960 through May of 1962, more than 850 IPOs were issues (more than one IPO per day on average). During 1967 alone there was more than 781 IPOs and that helped create the bear market of 1969. By 1974 the market slowed down to the extent that only nine new stocks were created and a further 14 during 1975. In my opinion this is comparable with the ICO market of 2017. The same pattern repeated. 4,000 new stocks were born during 1980’s and ultimately led to the crash of 1987. 5,000 IPOs were also created during the 1990’s and the following year after the dot-com bubble crash only 88 IPOs were filed.

Graham notes that speculators only have an illusion of making handsome profits on these issues. A way to recognize the end of a bull market is when these new issues’ value is competing with large or medium sized enterprises with long market history. The intelligent investor is always wise to not get close to any of these traps even if they pass the strictest stress tests. For every dollar you make during these market conditions, you will be lucky if you only lose two.

Don’t be fooled by the success stories of investing in Amazon and Apple from IPO stage. For every success story out there there are a thousand loser stories. As Graham says, it doesn't matter how many people want to buy a stock, your reason for buying a stock should always be “the cheap way of buying a desirable business”. Anytime you want to remind yourself of Wall Street's way to fool you look no further than the VA LINUX stock.

When you hear IPOs don’t think of Initial Public Offering but:

• It’s Probably Overpriced
• Imaginary Profits Only
• Insiders’ Private Opportunity
• Idiotic, Preposterous, and Outrageous

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About my Channel:

Hi Steemians,

In this corner of Steem I am finding out the things I will be offering to the community. I have a lot of different passions and I am planning to include these here for everyone to benefit from my experiences. I can not wait until my channel gains more momentum and read your comments and suggestions.

You can expect me to cover the following topics within the next few months:

• Summaries important takeaways of the books I am reading
• Notes regarding long term goals I have for myself and can be shared with others
• Food recipes and tips on cooking
• Photography and travelling advice about the places I have visited.
• Music I enjoy listening to

For now, I will be focussing on #1, summarizing some of the books I have read such as: The Servant, The Intelligent Investor, CryptoAssets, and How to Win Friends and Influence People. The photos you see on my posts are all taken by myself, unless I include the source (obviously).

I would like to thank all of you for joining Steem, putting your thoughts and energy on this network by being active. The amount of meaningful content here blows my mind and I am grateful to be a part of it.

As a way to say thank you, I will compile a list of community members here for all my followers. I will encourage everyone in the list to review other's content, comment, and upvote them. Please ask me to include your account in the comments below if you find my content interesting and want more of it.

@dame

Thank you,
-AZ