{"id":10410,"date":"2020-05-08T08:11:00","date_gmt":"2020-05-08T12:11:00","guid":{"rendered":"https:\/\/einvestingforbeginners.com\/?p=10410"},"modified":"2022-06-01T15:46:18","modified_gmt":"2022-06-01T19:46:18","slug":"fundamental-investors-ashul","status":"publish","type":"post","link":"https:\/\/einvestingforbeginners.com\/fundamental-investors-ashul\/","title":{"rendered":"Mount Rushmore of the Greatest Fundamental Investors in the Stock Market"},"content":{"rendered":"\n

Everything that Andrew and Dave preach on the podcast<\/a>, and something that I have learned from them and quickly adopted, is the importance of understanding the numbers when investing so that we can be disciplined fundamental investors.<\/p>\n\n\n\n

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I mean, Andrew and Dave have really coined the term to \u201cinvest with a margin of safety, emphasis on the safety\u201d and the only way that you can truly do that is by finding a company that is undervalued vs their intrinsic value, and they best way to do that is by utilizing the Value Trap Indicator.<\/p>\n\n\n\n

Just as I said that I learned this important philosophy from\nAndrew and Dave, I think that it\u2019s important for us all to find those leaders that\nwe can try to mimic our own investment strategies after, so I figured it was\ntime to narrow down the list\u2026welcome to the Mount Rushmore of the Greatest\nFundamental Investors in the Stock Market!<\/p>\n\n\n\n

Peter Lynch<\/strong><\/p>\n\n\n\n

I feel like I have to start my list off with Peter Lynch.\u00a0 Not necessarily that he\u2019s my #1 on the Mount Rushmore, but he has had one of the most important roles in shaping me personally as an investor.\u00a0 Lynch has written many books but the two that I love are \u2018One Up on Wall Street\u2019<\/em><\/a> <\/em>and \u2018Beating the Street<\/em>.\u2019\u00a0 <\/a><\/p>\n\n\n\n

Both of these books have taught me not only the theory of\ninvesting but a great application to actually be able to apply his knowledge to\nget ahead in the market.<\/p>\n\n\n\n

Lynch coined the term 10 Bagger<\/a> because, well, he had a lot of them.  Lynch was able to identify companies that had a great opportunity to become worth 10+ times what he paid for them and to be honest, isn\u2019t that what we\u2019re all hoping to be able to do?<\/p>\n\n\n\n

He also created the PEG ratio<\/a>, which essentially is taking the ever-common P\/E ratio and then applying a growth aspect to it, hence the \u2018G\u2019 in P\/E.  He felt that while the current P\/E is important, it only shows where the company has been and not necessarily where they\u2019re going.<\/p>\n\n\n\n

Two great quotes from Lynch that really sum up everything\nabout him are:<\/p>\n\n\n\n\n\n\n\n

\u201cKnow what you own, and know why you own it\u201d<\/span><\/p>\n\n\n\n

and<\/p>\n\n\n\n

\u201cFar more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.\u201d<\/span><\/p>\n\n\n\n

The first seems obvious, right?  But if you\u2019re like me when I first started\ninvesting, I couldn\u2019t even tell you what sector some companies were in that I\nowned.  All that I knew was that I heard\nthem on CNBC as a \u201cFinal Trade\u201d or on the \u201cLightning Round\u201d and decided that I\nliked what was said and I was going to buy them.<\/p>\n\n\n\n

Some of the time it worked, sometimes it didn\u2019t \u2013 but I was\n100% gambling, not investing.  Don\u2019t be\nlike me.<\/p>\n\n\n\n

And the second quote I love because so many people try to\nfocus on timing the market, but you will likely miss out on gains waiting for\nthe right time to get in.  Just keep on\ndollar-cost averaging and take your gains. \nEven if you invested at the worst time ever you can make a ton of money,\nso why try to be an all-star?  Just dollar-cost\naverage and you will be just fine!<\/p>\n\n\n\n

Benjamin Graham<\/strong><\/p>\n\n\n\n

Benjamin Graham is known as the \u201cFather of Value Investing\u201d\nso considering my infatuation of value investing, if he were to say, \u201cAndy, I\nam your father\u201d I don\u2019t think he would be wrong\u2026.?<\/p>\n\n\n\n

He wrote \u2018The Intelligent Investor\u2019<\/em> which many\nconsider to be the one of the most important books ever, for any investor.  Don\u2019t believe me?  Even Warren Buffett called it “the best\nbook about investing ever written.”<\/p>\n\n\n\n

To me, it\u2019s one of the books that I can ready multiple times and pick up something new every time.  I have ready it twice and am thinking it might be time to read it again.  I try to ready it once\/year and see what new things that I can take away from it, but my favorite lesson ever from it is when he talks about Mr. Market.<\/a> <\/p>\n\n\n\n

Essentially, he breaks down the mood of the market into terms that anyone can understand.  <\/p>\n\n\n\n

Graham was a huge advocate for dividend payments as well, and I think that you know that we feel the same way at einvestingforbeginners.com.  Not only are dividends a great source of steady income, but if you DRIP them<\/a> then you\u2019re giving yourself the opportunity to earn compound interest on top of your dividends, which are also being compounded.<\/p>\n\n\n\n

It truly is hard for me to decide between my two favorite Ben Graham quotes<\/a> because there are so many , but if I was forced to do so, I would have the two noted below:<\/p>\n\n\n\n

\u201cBuy when most people, including experts, are pessimistic, and sell when they are actively optimistic\u201d<\/span><\/p>\n\n\n\n

and<\/p>\n\n\n\n

\u201cTo have a true investment, there must be a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.<\/span>\u201d<\/p>\n\n\n\n

The first quote really gets down to a simpler version of\nwhat value investing is.  You\u2019re buying\nfrom pessimists that have the company undervalued and then you\u2019re selling to\noptimists that are willing to pay more than what the company is truly\nworth.  <\/p>\n\n\n\n

And the second quote is everything that Andrew, Dave and I preach \u2013 investing is about finding companies that are drastically undervalued and then making sure that there is a strong margin of safety.\u00a0 The way to do this is with numbers, which I would recommend using the Value Trap Indicator<\/a>, and also thinking about the company on a qualitative basis.<\/p>\n\n\n\n

If I had to recommend one book for all investors to buy, it would be \u2018The Intelligent Investor<\/em>.\u2019\u00a0 Normally I am all about renting books from the library if you can, but this book is one that you can ready many, many times, so do yourself a favor and grab a copy from Amazon<\/a>.<\/p>\n\n\n\n

Warren Buffett<\/strong><\/p>\n\n\n\n

Chances are, you have heard of Warren Buffett before.  He, along with Charlie Munger, run Berkshire Hathaway and is commonly referred to as the greatest investor of all time.  <\/a><\/p>\n\n\n\n

Personally, I put Buffett on this list because he focuses on the most important investment strategy in my eyes, and that\u2019s finding companies that are undervalued vs. their intrinsic value.  I used to be somewhat of a skeptic of Buffett, but after reading his book, \u2018The Essays of Warren Buffett<\/em>,\u2019<\/a> I can say that I have turned from skeptic into a firm believer.  <\/p>\n\n\n\n

It wasn\u2019t that I thought he was a fraud or anything, but I\njust naturally have the tendency to have a contrarian view when so many others\nare all-in on a specific viewpoint.  <\/p>\n\n\n\n

But like I said, I am sold on Buffett.  Buffett owns a significant amount of business outright<\/a> and also invests in many others, including the Top 10 Holdings of Berkshire listed below from Motley Fool<\/a>: <\/p>\n\n\n\n

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If I were to sum up Buffett\u2019s investing, it would be by\nusing two of his own quotes:<\/p>\n\n\n\n

“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”<\/span><\/p>\n\n\n\n

and<\/p>\n\n\n\n

\u201cIt’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.\u201d<\/span><\/p>\n\n\n\n

I mean, it\u2019s pretty simple, right?  Find a great company that is reasonably\npriced and then think about how you would feel owning that company 10 years\nfrom now.  Of course, your investing\nstrategy needs to go much deeper than that, but if you can\u2019t get past this\nstep, then it\u2019s likely time to stop thinking about that company!<\/p>\n\n\n\n

Something that Buffett has also talked about is that he thinks the average investor shouldn\u2019t actively manage their portfolio and that they should be invested in index funds.  Believe it or not, I agree with him, but I think that by you reading this article it means that you\u2019re not willingly allowing yourself to be average \u2013 you want to outperform the market!<\/a><\/p>\n\n\n\n

Statistically speaking, half of us will be below average, so\nthat\u2019s what leads me to put my last member of the Mount Rushmore on this list!<\/p>\n\n\n\n

Jack Bogle<\/strong><\/p>\n\n\n\n

Jack Bogle was the founder of Vanguard and is credited with\nbeing the father of the index fund, and for that, I think that we all owe him a\nbig thank you.  Bogle really focused on\nthe fact that investing wasn\u2019t built for the average person and he created the\nindex fund with the goal of mimicking the stock market but for a much, much\nsmaller fee than what was commonly charged to the average investor.<\/p>\n\n\n\n

By mimicking the market and charging lower fees, he felt that\nthis would allow the investor to beat the average investor without actually\nreturning above average gains.<\/p>\n\n\n\n

Bogle had 8 rules for investing<\/a> and to be honest, I agreed with every single one of them:  <\/p>\n\n\n\n