Intelligent Investing: More character, less brain

Patience.  Discipline.  Education

One of the books on my current reading list is The Intelligent Investor by Benjamin Graham.  If you don’t know who Benjamin Graham is, but are familiar with Warren Buffett, know this – Graham was Buffett’s financial teacher and mentor.  Graham is known as the father of value investing.

I read through The Intelligent Investor ten or twelve years ago.  It’s been on my shelf since then, occasionally referenced, but mostly collecting dust.  Because of Dividend Farmer, which discusses a form of value investing, I thought I’d wade through 536 pages of Graham’s work once more.

The tome serves up plenty of knowledge on the fundamentals of investing and foundational principals like margin of safety.  Although I’m keen to reexamine these topics, I’m also fascinated by Graham’s philosophical perspective.

For instance, Graham defines the term intelligent investor early on indicating that intelligence doesn’t mean possessing exceptional IQ or SAT scores.  Instead, intelligence is a function of patience, discipline, eagerness to learn, and the ability to think for yourself rather than following conventional wisdom.

4 Things a Dividend Farmer Needs discussed the requirement for patience and care in tending your dividend investments.  This diligence includes careful selection up front as well as monitoring and waiting patiently after the seeds have been planted in order to harvest your crop. 

The principal of buying and holding solid companies is a cornerstone in Graham’s value investment world.  The beauty of it is that finding, buying, and holding quality companies over the long run doesn’t require a Ph.D. or a degree in rocket science.  Dividend Farmer isn’t about piling it higher and deeper or employing orbital mechanics to get to an investment destination.

However, value investing through dividend farming requires a touch of persistence in discovering value and holding onto it in the face of advice from the trading class.  Remember, traders don’t get paid for investing so much as they get paid for you buying and selling.  This may be why traders on the floor of the New York Stock Exchange cheer at the closing bell regardless of whether the market went up or down.  The fact that it was moving at all meant people were trading, putting transaction costs into the traders’ pockets along the way.

As it pertains to trading one should be careful when following the masses because the “m” is often silent.  Value investing and dividend farming aren’t perennial favorites of the trading crowd or the media chattering class.  Neither approach is sexy nor generates transaction churn driving money into traders’ accounts instead of yours.  However, as Graham’s record and that of his protégé attest, value investing has stood the test of time.  It’s my belief that dividend farming, which parallels and overlaps value investing in many ways, will do so, too.  Thus far, I’m pleased with the results and happy to say I’m a Dividend Farmer.

The thoughts and opinions expressed here are those of the author, who is not a financial professional.  Opinions expressed here should not be considered investment advice.  They are presented for discussion and entertainment purposes only.  For specific investment advice or assistance, please contact a registered investment advisor, licensed broker, or other financial professional.