The intelligent investor is a realist who sells to optimists and buys from pessimists.
Benjamin Graham, the father of value investing, writes this definition of the intelligent investor. He says,
The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists.
If you follow the stock market, you will know that it fluctuates between highs and lows or between optimism and pessimism. The real key for an investor is to find out the right price for a given stock so that he can get more value out of it. The difference between price and value is very important to understand. Everyone is aware of the price but there are very few people who can estimate the value of something.
The best example to understand the difference between value and price is a book. Its price can be anywhere between 10-40$ or more, but the value that you get out of it can be 10 times, 100 times, or even 1000 times more than the price.
The intelligent investor has to be aware of the value of the stock to make a better decision to sell when the price is higher than the value and to buy when the price is lower than the value.
The definition is from the book –
This post is written in the response to Daily Prompt: Value. Let us know your thoughts in the comments.