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Intelligent Investing! Stock-picking tips from Benjamin Graham and Warren Buffett

I’d be surprised to find a shareholder who hasn’t heard of Warren Buffett, arguably the world’s most successful long-term investor, but you may not be so familiar with his idol and mentor Benjamin Graham.

Ben Graham wrote the first serious handbook for novice investors, The Intelligent Investor, back in 1949. This book provided a structural logic to security analysis and Buffett credits its wisdom to his ongoing success at value investing.

Graham died in 1976 but his legacy lives on in the book and many old and new investors consider it an essential read to this day.

Picking stocks for 2020

Whether you go on to achieve outstanding results from your financial portfolio of stocks, will depend on your effort, intelligence and the madness of the market. Both Buffett and Graham believed you don’t have to be particularly clever to make money in the stock market, simply astute.

One of my favourite lines from the book is to “follow and profit from folly in the market, rather than participate in it.” This is because market swings and fluctuations can be caused by external factors outside our reach and sometimes these are unexpected. This is not a time to panic or be greedy, but to think and apply the knowledge you’ve gained to purchase shares in good companies at bargain prices.

With the political chaos present in the UK at the moment, it seems a relevant time to take note and choose your stock investments carefully.

There are still many quality companies trading on the London Stock Exchange that have had their prices suppressed thanks to Brexit negotiations, hold-ups and general media furore.

This means there are great bargains to be had in 2020, as long as you do your research and don’t make any hasty decisions.

Make money, don’t lose it

All investors are looking to make money, but this is not as easy as it sounds. If you can make money, you can also lose it and that’s why being forewarned is being forearmed.

Research and preparation make you a shrewd investor and by taking the time to study annual reports and read articles such as this one, you are giving yourself a head start at making money in the stock market.

Three lessons Buffett learned from Graham was how to minimise the chance of suffering irreversible losses, how to maximise sustainable gains and how to control self-destructive behaviour that stops investors from reaching their potential.

The answers lie in choosing strong companies with solid management teams and structure, a decent income and the potential to grow.

Choosing industries that are most likely to grow in the future, then identifying the most promising companies within these industries is an excellent starting point.

In my opinion, anything that helps the fight against climate change and improves our health are areas that are heading for future advancement. Artificial intelligence, bio-tech, virtual reality and genomics are all areas of growth and all involve technology.

Whether you’re a defensive investor or an enterprising one, you’d do well to heed Benjamin Graham’s advice and follow in the footsteps of legendary billionaire Warren Buffett on your road to riches.

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Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.