Man looking at documents with unsure expression.

Image source: Getty Images

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

If you haven’t started investing yet, it’s a great financial habit to add in 2023. Investing is a reliable way to build wealth, and the sooner you start, the more time your investments will have to grow.

Personal finance enthusiast Graham Stephan frequently provides investing tips. Recently, he shared 10 principles from The Intelligent Investor by Benjamin Graham, one of the most famous books on investing. If you’re a beginner ready to open your first account with a top stock broker, or even if you have some experience, these insights will make you a better investor.

1. There is a difference between an investor and a speculator

Investors carefully consider the fundamental value of a business and make long-term decisions. Speculators focus on price in hopes of making a quick buck. When you invest, you’re making an educated analysis, whereas speculation is more like gambling. The most successful investors avoid speculating, as this is a high-risk approach.

2. An intelligent person might not be an intelligent investor

Stephan correctly points out that temperament is more important than intelligence when it comes to investing. One of the biggest investing mistakes is making emotional decisions, such as panic selling when the market is down. Being able to maintain an even keel is extremely valuable for an investor.

3. Just because a business grows, it does not mean your investment will grow at the same pace

Stock prices don’t perfectly follow the growth of a company. A growing business could have a slow-moving stock price, while another company could see its value skyrocket based purely on its potential. Don’t expect stock prices to always behave rationally.

4. The market is like a voting machine in the short term but like a weighing machine in the long term

Continuing the point above, price fluctuations depend on the current market sentiment and don’t always reflect the true value of a company. But over long periods of time, fundamentals matter. That’s one of the reasons why it’s best to be a long-term investor.

5. The intelligent investor’s primary goal is to not lose money — and that’s not easy

Beginners often want to hit a home run. This is difficult to do, and it puts you at a greater risk of losing money. If you lose money, it’s twice as hard to make it back. For example, if your portfolio loses 50% of its value, it will need to increase by 100% just to get you back to where you started.

6. Buying even the best stock only makes sense at the right price

Finding good companies is half of successful investing. The other half is determining which of those companies are a good value in relation to their current prices. Don’t pay a premium just because you like a stock. The company and the price have to be right.

7. Diversify

With so many investment opportunities out there, it doesn’t make sense to tie your fortunes to a single company or industry. A diversified portfolio should have at least 25 to 30 stocks. If you don’t have the time or desire to pick that many stocks yourself, look into low-cost exchange-traded funds (ETFs). These invest your money in a large number of stocks for you.

8. Always look for a margin of safety

If you need to be 100% right to make money on an investment, it’s probably not a good idea. Stick to investments where you don’t need to nail all your calculations to make a profit.

9. Understand your style and commit to it

Most people are either passive investors or active investors. Passive investors pick some simple investments they can make on a regular basis and get good returns, such as ETFs, as mentioned earlier. Active investors build their portfolios themselves and spend lots of time looking for stocks they can get at a good price. There are also investors who primarily stick to passive investments, but also like to pick stocks from time to time. However, most lean heavily towards either a passive or active style.

10. Your worst enemy as an investor is yourself

It takes dedication and composure to invest well. You need to invest on a regular basis and avoid stopping — or even worse, selling — during economic downturns. But if you stick with it, you’ll be rewarded with the money you make from your portfolio.

The Intelligent Investor is considered an investing classic for a reason. Stephan shared many great pieces of wisdom, but if you’d like to learn more, the whole book is worth the read.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

Our Research Expert