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How To Become A Better Investor

An important part of becoming a better investor is to read. And in that spirit, here are a few great articles from my colleagues I have come across recently that I think will make help investors of all stripes better.

Margin of safety

The margin of safety is one of the most important investing concepts. It was first proposed by Benjamin Graham, and has been widely discussed by his students, most notably Warren Buffet.

In his article Why A Margin Of Safety Is Crucial For All Investors, Peter Stephens explains what the margin of safety is and why it is important. Here’s a key excerpt from his article:

“A margin of safety is simply seeking to buy a company at a discount to its intrinsic value. In other words, if an investor believes a company is worth $1 per share, buying it at $0.80 would represent a margin of safety of $0.20 per share. Put simply, it is a means of factoring in potential challenges which may face the company, both internal and external, and which may affect its share price in future.”

Pithy Buffett quotes

Buffett is famous for not just his investing prowess and fortune (which is currently estimated to be US$76 billion!). He is also well-known for being an educator on the subject of investing. Over the years, Buffett has shared countless wise quotes.

In this article, Jeremy Chia shared three great Buffett quotes.

First:

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

Second:

“I bought a company in the mid-‘90s called Dexter Shoe and paid $400 million worth of Berkshire stock, which is probably worth $400 billion. But I’ve made lots of dumb decisions. That’s part of the game.”

Third:

“An investor should act as though he had a lifetime decision card with just twenty punches on it.”

The first quote speaks of the importance of thinking long-term in the stock market. The second emphasises the reality that mistakes are part and parcel in investing. The third highlights the need for careful appraisal of one’s investing decisions.

When not to buy a stock

In investing, negative knowledge – knowing what not to do – can be as powerful as positive knowledge. In a recent article, Jeremy shared three bad reasons for buying stocks.

One of his reasons – “Because a company is ‘cheap’” – is a great reminder that investors should not be buying a stock just because it has a low valuation multiple.

Bad reasons to sell your stocks

Selling stocks is one area in investing that many investors find really difficult to master. Jeremy recently shared three bad reasons for selling your shares. They are:

1) Due to increase in share price

2) Because you read in the news that a bear market is coming

3) Because of speculative world news

Other investment options

There are actually many different options when it comes to investing – stocks are not the only option.

In a recent article, Stanley Lim shared nine different ways to invest. These include common avenues such as stocks, bonds, and properties, and less common vehicles such as venture capital.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.