Summary
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The Psychology of Money : Timeless Lessons on Wealth, Greed, and Happiness – Book
I can understand why Graham’s formulas would be appealing to you as a teenager, especially if you were new to investing. They offer a clear and concise set of steps to follow, which can be reassuring for beginners. However, it’s important to remember that investing is complex, and there is no guaranteed way to get rich. Even if you follow all of Graham’s formulas to the letter, there is still a risk that you could lose money.
That said, Graham’s formulas can be a valuable tool for investors of all experience levels. They can help you to identify undervalued stocks and to make sound investment decisions. However, it’s important to use them in conjunction with other forms of analysis, such as fundamental and technical analysis.
Yes, you are right. Few of Graham’s formulas actually work in practice. One of the reasons for this is that the market has become much more efficient since Graham’s time. Investors are now more aware of Graham’s value investing principles, and they are quicker to bid up the prices of stocks that are trading below their intrinsic value.
Another reason is that the business landscape has changed significantly since Graham’s time. Many companies now have intangible assets, such as intellectual property and brand recognition, that are not reflected in their book value. This makes it more difficult to identify undervalued stocks using Graham’s formulas.
That said, Graham’s value investing principles are still worth studying. They can teach you how to think critically about stocks and how to identify potential investment opportunities. However, it is important to use Graham’s formulas in conjunction with other forms of analysis, such as fundamental and technical analysis.