What are the actionable takeaways from "The Intelligent Investor"

The key takeaways for entrepreneurs or managers from "The Intelligent Investor" are:

1. Focus on reducing risk and protecting capital from loss. This can be achieved by diversifying investments and not putting all eggs in one basket.

2. Aim for sustainable returns over the long run rather than trying to beat the market in the short term. This requires patience and discipline.

3. Use the Price/Earnings ratio based on a multi-year average of past returns to value a company. This helps avoid overvaluing a company based on a single profitable year or high revenue projections.

Question was asked on:

Wall Street calculates the Price/Earnings ratio primarily on next year's earnings. However, Graham insists on calculating the Price/Earnings Ratio based on a multi-year average of past returns, which lowers the odds that an investor will overvalue the company simply because it had an odd profitable year or has high revenue projections. Let's say a company has earned $0.50 per share over six years but earned $3 over the last 12 months. At 25 times the P/E ratio (based on the last year), the stock would be valued at $75. In contrast, valued at 25 times the average earnings over the past seven years, and the stock would be valued at just $21.43.

Asked on the following book summary:

The Intelligent Investor

This book will not teach you how to beat the market. However, it will teach you how to reduce risk, protect your capital from loss and reliably genera...

Download and customize hundreds of business templates for free