3 Lessons from The Little Book That Beats the Market

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I finished reading The Little Book That Beats the Market by Joel Greenblatt a few weeks ago.

It is a crash course on successful stock market investing and one of the best finance books I have read till date.

Here are three lessons I learned from the book-

  1. Getting Started Is a Big Deal.

It takes a whole lot of discipline and self control to start saving money. Even if you decide to religiously save your money for the future, it is simply easier and more pleasing to your mind to spend it on stuff you would like to possess.

So, if you can start by saving 10% of your earnings every month, I applaud you. You are on your way to become a financially independent person.

  1. Stock Prices Move Around. That Doesn’t Mean the Value of the Company Has Increased/Decreased.

Joel Greenblatt, the guy who wrote TLBTBTM, calls the stock market ‘Mr. Market’, who is an emotionally unstable king with serious issues. Some days, he passes the ruling that a business is worth twice its true value. Sometimes, when he is suffering from seasonal depression, he decides to halve the value of the same business.

Nobody can question him, and nobody knows when he will change his mind. But that doesn’t mean that the value of the business suddenly doubles or halves. It’s just the whim of a man-child who owns the market.

  1. There Is No Need to Be Reckless With Your Investments.

Just jumping the gun and buying at a seemingly low price isn’t the way to purchase shares that will earn you crazily. Benjamin Graham, the OG investor, advises investing with a margin of safety.

Basically, you are never required to act. You can buy, sell and hold as you please. Buy when you feel that the shares of a company are trading at a huge discount. Buy when your original purchase price can protect you from losing money on your deal. That’s called margin of safety.

Key Message: Get started, do not be scared when stock prices fluctuate, and always, ALWAYS invest with a margin of safety.

That’s all for today, thanks for reading my TED Talk :)

Catch you on the flip side,

Sarah

P.S. What is your favourite finance book, and would you like a part 2 of this? Eh, I will still post a part 2, because I have written, like, 15 more points.