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First published in 1949, this version that I read was re-published in 2005 with a forward written by John Bogle who started Vangard Mutual Fund. Bogle's forward serves as a very good summary of The Intelligent Investor, highlighting key points clearl
Benjamin Graham's last line in The Intelligent Investor sums up the entire book in his trade-mark common-sense way: " To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks."First published in 1949, this version that I read was re-published in 2005 with a forward written by John Bogle who started Vangard Mutual Fund. Bogle's forward serves as a very good summary of The Intelligent Investor, highlighting key points clearly. So I found it useful to read the forward again after finishing the book as a quick refresh of its content.
Graham's language may be a bit old fashioned, so some may find his writing style takes a little bit of getting used to. However, once I got my pace of reading going, I find the old fashion style gives me a sense of comfort and assurance – as if a grandfather was sharing all his valuable experience with me. Certainly good things stand the test of time, just as sound values: "Sound investment principles generally produced sound investment results…we must act on the assumption that they would continue to do so."
Graham is very clear form the start that he is not writing for speculators but for the layman who wants to have a sound approach to grow his weath steadily. He believes that lay investors can achieve "a creditable if unspectacular result with a minimum of effort and capability…since anyone – by just buying and holding a representative list – can equal the performance of the market averages…"
He warned those who tries to beat the market, as many smart people have tied to do this and failed. How he explained this makes a lot of sense to me - every stock market broker thinks he can outdo the market. That means the stock market experts as a whole is trying to beat itself – a logical contradiction. They just cancel each other out.
Thus, one should not rely on a financial advisor who promises the sky and raise your hopes that he can do better that the market average. That, claims Graham, is not possible.
"The real money in investing will have to be made, as most of it has been in the past, not out of buying and selling but out of owning and holding securities, receiving interest and dividends and benefiting form their longer-term increase in value."
Graham chastises average investors for their sloth and ignorance, for willingly giving up their responsibility and rights as business owners to management. This, he feels, is due to the institutionalisation of financial services which has left investors a step removed from ownership.
He disagrees with the commonly held view that "If you don't like the management, sell the stock." He feels this does nothing to improve bad management, only puts down the price of the stock and shifts the ownership to someone else. "Investors as a whole seem to have abandoned all claim to control over the paid superintendents of their property."
Ultimately, it is important for investors to give themselves a margin of safety by buying a stock at a price that is lower that its appraised value and to diversify the portfolio. These would put the investors in good stead, as against speculators.
I like this book. It does not give you many formulas for security analysis (Graham says you can read further in his earlier book Security Analysis). What The Intelligent Investor does is that it lays the foundation for laymen by giving a sound approach to investment, written with common sense and simplicity.
...more 1) Your main goal should be to not LOSE money; so understand the distinction between 'investing' and 'speculating,' and understand that most so-called investors are actually speculators. Minimize the extent to which you are a speculator. If you go in trying to get rich quick, you'll lose.
2) To that end, trailing P/E should be less than 15 and P/E * P/B (tangible) should b
1) Your main goal should be to not LOSE money; so understand the distinction between 'investing' and 'speculating,' and understand that most so-called investors are actually speculators. Minimize the extent to which you are a speculator. If you go in trying to get rich quick, you'll lose.
2) To that end, trailing P/E should be less than 15 and P/E * P/B (tangible) should be < or = 22.5.
3) But don't buy SIMPLY because the company is cheap; look for EPS growth ideally > 30% (cumulative) over the course of the prior 10 years. This is a good indicator of a stable and sound business model.
4) Look for a current ratio (current assets / current liabilities) greater than 2, as a signal the company is financially secure.
5) Strongly prefer companies with dividends, and with consistent dividend growth.
6) Don't invest in companies that have had negative earnings-per-share in the last three years.
7) But Graham's real key is PSYCHOLOGY: Market crashes should be thought of as exciting and delightful fire sales on the best stocks. By contrast, be terrified when the market has gone up far, fast, and RESIST THE URGE TO START buying more stock when the market is up. (People criticize Graham for advocating market-timing, but really he advocates a form of dollar-cost-averaging, where one increasingly invests in companies that look objectively undervalued when the market goes down, and (assuming one doesn't hold forever) divests slowly as the market goes up, if in one's view one's individual stocks become over-valued -- he does not advocate investing or divesting simply because the market goes down or up, one always looks at individual companies.)
He also has very interesting discussions of bonds, though I found them less relevant because I don't invest in bonds directly. To Graham, incidentally, Buffett added: A) know when to break these rules; B) prefer companies with wide inherent 'moats' (his famous example is that if you gave him a billion dollars today, he could not create a brand that would compete effectively with Coca Cola); C) buy private, illiquid-but-outstanding businesses on the cheap -- e.g., See's Candies; D) own and use an insurance company business to create 'float' from premiums that can be used for investing; E) invest in what you can understand. Sadly "C" and "D" are not feasible for the rest of us, but between Buffett and Graham the small-time investor has about all he/she needs in order to at least not get hosed!
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It was the best $8 ever spent. It teaches you some basics about the behavior of the market and it teaches you to be very careful. I learned some
OK, the recent stock market drops scared me. I got hit by the drops in 99 and said I would never let it happen again. This time I had what I thought would be value stocks. The problem was I didn't know if I should sell or hold the stocks. So for $8 I bought a used copy of Ben Graham's book. I stopped reading my other book and read this book like crazy.It was the best $8 ever spent. It teaches you some basics about the behavior of the market and it teaches you to be very careful. I learned some key's to determining the value of stocks and to buy stocks with a margin of safety relative to other stocks. I did find that some of my "Value Stocks" weren't all that great.
I absolutely recommend this book, especially right now. Now is a great opportunity to pick up value stocks that have dropped a bunch. They dropped not because that are bad stocks but because Mr. Market has dropped and they've been pulled down.
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The essence is that an intelligent investor is one who doesn't think of this as gambling. Do solid fundamental, qualitative analysis rather than looking at charts. Know what the company stands for. And you can't beat the market.
Maybe if you know nothing about the stock market, then this book is for you to get an idea of what you are getting into and what to expect.
The f
I had high expectations from the book, which it failed to meet. But then, this book is too old to have a lot of relevance now.The essence is that an intelligent investor is one who doesn't think of this as gambling. Do solid fundamental, qualitative analysis rather than looking at charts. Know what the company stands for. And you can't beat the market.
Maybe if you know nothing about the stock market, then this book is for you to get an idea of what you are getting into and what to expect.
The first 10 chapters were a drag. They should've been 10 pages max, with examples. This is the content in it's entirety:
-No one can beat the market consistently.
-Dollar cost averaging. Invest the same number of dollars in stocks each month. This way you buy more when cheap and less when expensive
-You cannot beat the market even if you are an active investor.
-Think long term, index funds
-Qualitative analysis over speculation
-Diversify. Look for large companies with dividends
-Buy cheap, sell high and NOT vice versa (most people get this wrong)
-purchase of bargain issues
-invest in closed end funds
Couldn't go through the last 3-4 chapters, since I ran out of patience.
Some notes from chapter 11-16:
Estimating value of a stock:
future earnings.
general long term prospects
management in the company
financial strength and capital structure
dividend record
earning*(8.5+2*growth rate)
Earnings per share:
beware of tricky caveats intended to bump earnings.
learn how to see fishy stuff in earnings.
read backwards, read more, read the footnotes of earnings report.
Things to look at in a company:
Profitability
Stability
Growth
Financial Position.
Dividends
Price History.
Seven statistical requirements for inclusion in a defensive investor's portfolio:
-Adequate size.
-A sufficiently strong financial condition.
For industrial companies current assets should be at least twice current liabilities—a so-called two-to-one current ratio. Also, long- term debt should not exceed the net current assets (or "working capital"). For public utilities the debt should not exceed twice the stock equity (at book value).
Continued dividends for at least the past 20 years.
-No earnings deficit in the past ten years.
-Ten-year growth of at least one-third in per-share earnings.
-Price of stock no more than 11⁄2 times net asset value.
-Price no more than 15 times average earnings of the past three years.
I have to disagree with Buffett on this one, but that's because I'm a very different type of investor than Buffett. I'm a Boglehead (follower of Vanguard founder John Bogle), so I invest through broadly diversified, passive index f
If you read investing books or magazines, you've undoubtedly heard of Benjamin Graham. He's considered the father of value investing, and Warren Buffett is one of his disciples. In fact, The Oracle of Omaha called this book "the best book about investing ever written."I have to disagree with Buffett on this one, but that's because I'm a very different type of investor than Buffett. I'm a Boglehead (follower of Vanguard founder John Bogle), so I invest through broadly diversified, passive index funds instead of individual stocks and bonds. I read this book to learn Graham's general investing advice and opinion of the market, not to learn his formulas for analyzing the values of stocks and bonds.
Much of the book's data is understandably stale, since it was first published in 1949. You can definitely tell it was written in the pre-Internet era of investing, before people had easy access to mutual funds, ETFs, 401(k)s, IRAs, and day trading.
Although the financial world has changed much since his time, Graham's fundamentals remain solid. For most investors, he recommends a diverse portfolio of bonds and stocks held for the long-term. He strongly advises against trying to time the market, and says to never invest in something you don't understand. Graham warns against being an emotional investor; he says to invest based on arithmetic, not optimism.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks."
"The real money in investing will have to be made - as most of it has been in the past - not out of buying and selling, but out of owning and holding securities, receiving interest and dividends, and benefiting from their long-term increase in value."
Notes
Graham divides investors into 2 camps: defensive and enterprising. The defensive investor is risk-averse, seeking to preserve capital and obtain a reasonable return. The enterprising investor is more risk-tolerant, willing and able to analyze stocks and bonds to find higher returns.
Defensive portfolio
• 25-75% US bonds, depending on investor's risk tolerance and situation
• common stocks of "leading" or "prominent" US companies (blue chips), purchased at a reasonable price based on historical data
Enterprising portfolio
• buy low, sell high
• growth stocks
• value stocks
• take advantage of "special situations" like mergers and acquisitions, business reorganizations, etc.
You can't forecast or time the market.
Unless you're forced to sell your shares, you shouldn't care about share prices. Ignore the daily ups and downs of the market.
Use dollar cost averaging or formula timing plans to remove the psychological factors of investing.
Risk vs safety
Risky investments are those that have a chance of declining in price, but a history of positive returns. You don't care about temporary declines as long as you hold the investment, because it's not until you sell that the decline would be realized.
Unsafe investments are those with history of poor returns over many years; these are not wise investments.
Prices sometimes reflect the present, and sometimes reflect the future; because you can't tell which, it's hard to determine if stocks are fairly priced.
Margin of safety
Margin of safety is the secret to sound investing.
This is a business' value over its debt (its ability to earn more than it needs to cover its expenses), or the difference between price and value.
Guarantees a better chance of profit than loss (not a guaranteed profit).
Diversification across several stocks increases the certainty of profit.
The margin is based on statistical data, not speculation.
... Of course it's not that easy. This book is long, dense, and dry. And even if you read and absorb every page, you're still not going to be Warre
Okay, this is the book to read if you are serious about investing in stocks. Benjamin Graham's "value investing" method is the time-tested "choose 'em carefully and hold 'em" long-term strategy used by Warren Buffett. Benjamin Graham is the man that Warren Buffett calls The Man. So, you know, if you want to be rich like Warren Buffett, read this book.... Of course it's not that easy. This book is long, dense, and dry. And even if you read and absorb every page, you're still not going to be Warren Buffett. But you'll be a lot more informed about stock investing. Most of it is about how to analyze the actual long-term value of a stock, which means diving deep into company financial statements. Not just picking one based on a favorable history or because you think you can predict a stock is about to take off because you're sure the company is the next Apple. (Hey, remember in the 80s when Apple seemed all but dead? Meanwhile, how's that Kodak stock looking?)
Make no mistake, this is not one of those self-help "How to beat the market" books. It's pretty much a textbook, with graphs and charts and long complicated financial terms that you need to study as seriously as you studied for your college final exams (well, maybe more seriously than that) if you're really going to get anything out of it. It is not for the dabbler, the mildly interested, or the "can't wrap my head around complicated formulas" investor.
No, no, I have not gotten rich like Warren Buffett. I didn't buy Apple in the 80s, either.
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I'd recommend The Random Walk Guide to Investing: Ten Rules for Financial Success for a simpler, more straight-forward alternative to this book. It's not that I wouldn't advise anyone to read The Intelligent Investor, it's just that if you don't have the time to plod your way through Graham's outdated details, either skip straight to the commentary, or check out Malkiel's book. You won't go wrong either way, and you definitely won't go wrong if you want to try and read this thing in its entirety. It was just difficult for me to do so.
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……rest other testimonials are just reiterations.
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P.S. Not for traders.
P.P.S. Don't forget to read Jason Zweig's commentary after each chapter to get the current context. Most of the times, those help to understand the original text much better.
……rest other testimonials are just reiterations.
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P.S. Not for traders.
P.P.S. Don't forget to read Jason Zweig's commentary after each chapter to get the current context. Most of the times, those help to understand the original text much better.
At the begi
Intelligent Investor by many is considered to be the best book on value investing that you will ever read. The book is written by Benjamin Graham who was Warren Buffett's lecturer at Columbia University. Warren Buffett, one of the greatest investors of all time, personally endorses it and says that this is, by far, the best book on investing. He says that stock is an ownership interest in a company and is something completely opposite to speculation, day trading or anything like that.At the beginning of the book, Graham outlines what he terms as investing as opposed to speculation. Basically, investing is where you aim to preserve the capital and you thoroughly research the shares so that, within a certain extent, guarantee what kind of earnings you're going to get from that investment. In other words, invest only if you would feel comfortable to hold the stock in the future without seeing the fluctuating prices. That's the essence of value investing.
Nevertheless, what Graham really highlights, apart from research and a plethora of ratios you should be able to evaluate, is how the psychology and logic of the investor really matter and how to keep your emotions under control. He goes through different types of investors, starting from the defensive investor who is someone a lot more careful. It could be even called the passive investor because he invests and then leaves the wallet allowing it to grow. Next, we have the entrepreneurial investor who is someone willing to and has time to do a lot more research to look for undervalued companies that he can put their money in and watch it grow over time. He also argues that most people should be the defensive investor because the entrepreneurial investor approach does require a lot of time. Too much time for someone who also has a full-time job at the same time as being an investor.
Next, he talks a lot about asset allocation. Generally speaking, it is about diversification of your investments where 75% of your portfolio you should be in stocks as the market is rising and 25% of it in bonds or other fixed-income assets. Of course, 75% to 25% is just approximation. As the market hits its peak (or what you think might be the peak) you should start to sell off your shares and start aiming at bonds which then should represent 75% of your wallet. When the recession hits rock bottom you should repeat the circle and go back to shares. Graham also gives his advice on further diversifications of companies in your wallet, their size and ratios they should present.
Intelligent Investor is a pretty old book and was written 1949 so you could expect some dry and a bit old-fashion language. Nevertheless, it was updated several times and I would recommend the latest version as each chapter was enhanced by comments provided by Jason Zweig. This adds a lot of value because he goes through what Graham is talking about and applies that to modern times and companies. On the other hand, as the book...(if you like to read my full review please visit my blog https://leadersarereaders.blog/the-in...)
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The defensive investor does this, then puts new money in every month and checks on the ratios of his/her portfolio ever quarter or six months to make sure its still balanced (hypothetically lets say 60% stocks 40% bonds) this reduces drifting and ensures long term revenue, even if it's not the absolute highest one can earn it's still consistent and positive.
Because their choices were made based on intrinsic value and not market prices, these companies are good long term investments and the investor doesnt have to sell and buy new ones constantly. It's also suggested to have companies spanning all sectors to reduce risk by diversifying.
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Review:
Whether you are an avid investor with a complex understanding of the markets or a beginner who is yet to start learning, there is little doubt that you have heard of Warren Buffet. He represents a level of success that very few people ever reach. Most of us know Buffet as the second richest man in
Why I Read this Book: Warren Buffet became the successful man he is today greatly as a result of what he learned from the man who wrote this book. We have the chance to read exactly what he read.Review:
Whether you are an avid investor with a complex understanding of the markets or a beginner who is yet to start learning, there is little doubt that you have heard of Warren Buffet. He represents a level of success that very few people ever reach. Most of us know Buffet as the second richest man in the world, but many of us do not stop to think that he has build his great fortune solely off of investing. He has not invented anything or built any specific business. He has gotten to where he is by nothing more than diligent value and principle based investing (with very little debt I might add).
I apologize for the long rant on Buffet especially since he only wrote the first few pages of this edition. The man behind this book's genius is Benjamin Graham. It was many of his fundamentals and principles that got Buffet started with a foundation that soon grew to be insurmountable. The amazing thing is that anyone interested in these principles has the opportunity to buy a copy of this book for less than twenty dollars. It continues to blow me away; the amount of success-related knowledge that is available to us for the learning.
To be very honest up front, this is not the easiest read. It is written by a 20th century economist and quite frankly it often reads just like that. But to that note one should not pick this book up for humor and entertainment as much as he should to learn. Although there will be times when you will find yourself laughing or smiling at some of the stories told and how they ring true even today in our ever more sophisticated world. One such example is the concept of emotional investing, one of which most all of us have been guilty at one time or another. It is worth mentioning that for every bit of hard theory, this particular revised addition of the book has just about as much digestible commentary (courtesy of Jason Zweig) to help the reader through. This commentary is crucial to the level of satisfaction of the read.
I would not dare to get into the specifics of this book as I would not do them justice and I feel that the above should be more than enough reason to read the full edition. However I will comment on the over all tone of it. The book (as well as Buffet's proven strategy) is based on a fundamental set of principles. These principles are something that, no matter what the circumstances, is never to be broken. This is how the rigor of an "intelligent investor" is maintained. I believe this to be the real difference between Graham and Buffet and the rest of the investment community (If you have not already, you should be sure to read Buffet' s 13 principles on Berkshire's website). Both these men display an inhumane level of disciple to stick to the very principles they have developed.
Having a principle-based investment strategy is something that will prove to be of much value as one progresses along his career (or hobby) of successful investing. If you are able to decide on a set of principles (be them your own or those of others) and stick to them at all costs, decisions suddenly become much more fluid and easy to make. How else do you think Buffet can make a $4 billon investment before lunch time?
The real reason I mention this is that it has a much greater underlying message. If principle based investing has proven so successful (provided your principles are sound of course) then imagine what can be accomplished in the overall success of ones life if you live by a firm set of principles and core values. This quickly becomes clear once you read through some of the top rated books in my personal development section. By now I hope you have already developed your set of core values by which to live. Now take advantage of this book to establish a similar set of values by which to judge personal investments. The added long term financial success will be explicit. Then again I guess you could just buy Berkshire, but perhaps you should make that decision for yourself after reading the book that helped create it.
-Reading For Your Success
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One criticism: for all the words spent on intrinic value, no clear cut way is proposed for its calculation, however. Several proxies (i.e. book value, fair value, e
I'd read several books about Benjamin Graham as well as articles by him in the past, but this was my first foray into reading a book authored by him. It's definitely a great primer into the world of value investing and not only outlines its tenets but also their rationale. Several historical examples are used to illustrate his points.One criticism: for all the words spent on intrinic value, no clear cut way is proposed for its calculation, however. Several proxies (i.e. book value, fair value, etc) are used, but here investing begins to become an art.
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The book shows enormous efforts from GRAHAM; the author, through the editions of this book.
The comments by ZWEIG are extremely beneficial and was up to the standard of the original text using updated info and statistics beyond GRAHAM's times. The piece written by BUFFET at the end of the book is such a wonderful one and - nearly - summarizes the whole idea of th
The book shows enormous efforts from GRAHAM; the author, through the editions of this book.
The comments by ZWEIG are extremely beneficial and was up to the standard of the original text using updated info and statistics beyond GRAHAM's times. The piece written by BUFFET at the end of the book is such a wonderful one and - nearly - summarizes the whole idea of the book.
I will unquestionably read this book again and will always keep it on my desk (or at least in a place where I can reach easily). The index at the end of the book is extremely useful for looking up specific topics that were mentioned in the book.
Buffet said chapter 8 and 20 are the most important chapters of the book, and they are. But if I want to add other chapters for people who are interested solely in common stocks, I would recommend reading - in addition - chapters: 4-7, 11-12, 14-15.
Finally, I want to thank B.GRAHAM, the author. And W.BUFFET, the author's unique follower and one of the most - or shall I say the most - successful stock investor ever. J.ZWEIG, who - in my opinion - was up to the challenge of bringing the original text to present and to summarize and simplify each chapter by his valuable comments. And finally, HARPER COLLINS, the publisher; for their neat job publishing this book.
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In particular, Graham introduces the following concepts:
1. Value Investing. Before selecting a stock, understand the company, protect yourself against serious losses, and aspire to "adequate" not extraordinary perfo
This is a book that offers down-to-earth, practical advice on investing to a layman audience. Graham's message can be summarized in the last sentence, "to achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks."In particular, Graham introduces the following concepts:
1. Value Investing. Before selecting a stock, understand the company, protect yourself against serious losses, and aspire to "adequate" not extraordinary performance.
2. Protect yourself against inflation by purchasing TIPS. Never predict stock's future return by extrapolating from the past solely. Strive to be cautious.
3. Investing is as much a number's game as it is a mind's game. In his words, it is more about "character" than intelligence.
This book is packed with wisdom not only for investing but also for life. The advice Graham dispenses advising individuals to be grounded by solid fundamentals and to guard against animal spirits are valid for other life's adventures. This book should be in everyone's toolkit.
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It took me two months to read this book. At the end of this book, I ended up having a portfolio of an exigent value that was proofed through every piece of advice around the valuing of a stock. It just so happened that I was finishing this book before making any purchases as the stock market was collapsing due to the covid19 sit
To say that this book is a heavy piece of work is like saying, obesity is not a problem in the US. No wonder Republicans don't talk about this piece of education enough.It took me two months to read this book. At the end of this book, I ended up having a portfolio of an exigent value that was proofed through every piece of advice around the valuing of a stock. It just so happened that I was finishing this book before making any purchases as the stock market was collapsing due to the covid19 situation. Oh time, you unlovable beloved.
I think it would be impossible to write a review of this book. It's not just a book, it's an entire masters education course of personal financial management, without the jargons. However, if I were to oversimplify the hell outta it, here you go -
- Investment is NOT speculation. Anyone who says otherwise knows not his/her shit. Investment comes from a state of knowledge, not guesswork. However, one should know how much he/she doesn't know. Be socratic about this.
- Buying a stock should be treated as buying a piece of land. You don't want to see the value of the price of your land everyday. Instead you just hope that its price increases in a significant term of time. because of its location, foundations, floor area, number of bodies than can be hidden in the attic, garden access to Narnia, etc. The same goes for stocks. So uninstall those stock tracking apps now.
- Your investment portfolio can be built of primarily two things when it comes to security holdings - stocks and bonds. It's necessary to maintain a healthy ratio between the two. A 100% stock portfolio is overtly optimistic. A 100% bond portfolio is overtly pessimistic. As the Buddha said while smoking his third joint, follow the Middle Path i.e not more than 75% stock, not less than 25% bonds.
- The key to making money out of securities is in understanding the true value of a company, not checking what the stock price is. How you compute the true value of a company is a science, not an art. The key concept here is "Margin of Safety". Buy stocks that are clearly underpriced in the market. Look for "no brainer opportunities", so even if your calculations were a little bit off or specific assumptions about future prospects don't materialise, you're still likely to earn a profit. These opportunities are hard to find, but worth waiting for. These stocks especially become much more conspicuous in a bear market. And congratulations, we are now in the early phases of a bear market :)
- Inflation is the most misunderstood blow to any portfolio. Account for it. Learn that every government tries to maintain a certain level of inflation (surprise surprise!!!). The longer you want to draw benefit from your portfolio, the more you need to account for inflation.
- You truly don't need to have more than 10 securities (bonds and stocks together) to build value. Instead of looking for new stocks every day, just put money into the stocks you have valued and analysed properly at the start of every month when you get your salary. It's called dollar cost averaging. If you are reevaluating your portfolio for more than once in six months, you are doing something wrong.
- You can't time the market. YOU SIMPLY CAN'T. So if you feel that a stock has the right value, just buy it. And then forget about it.
- Building value for yourself isn't a competition. As a person with a job, you can't possibly hope to beat people who are professional security analysts. So don't even try to. Instead, focus on increasing the value of your own portfolio.
- (My own interpretation from the book looking at the current market) Buy an index fund that follows the S&P 500 that follows the market is a pretty safe beginning. This will ensure that if the market makes money, you make money. Moreover, most of these index funds are pretty diverse in their make up, which will surely add some cushioning if you are risk-averse.
My biggest learning from this book is the psychological aspect that is needed to be able to use this book. Graham states that an intelligent investor is one with a uniquely balanced temperament to not get influenced by external influences as and when they come up. Wall Street talks a lot. You really don't need to listen to it all the time.
I might have oversimplified a lot of things from what I learnt from the book. To get a much deeper understanding, I would highly recommend you read this book.
**Something I should add - The interpretations here are my own from reading the book. If you end up losing money by taking these advices at face value, you can't legally sue me. There I said it. Phew.
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Graham's central thesis is as follows:
An investors main goal should be to not LOSE money; To do this one must understand the distinction b
A must read for anyone considering actively managing their own investment portfolio. Out and out the best book I've ever read on investing. I highly recommend this version with forward by Warren Buffet and commentary at the end of each chapter by Jason Zweig. Zweig artfully ties Graham's principals to recent events and defends value investing in modern times.Graham's central thesis is as follows:
An investors main goal should be to not LOSE money; To do this one must understand the distinction between 'investing' and 'speculating' and avoid the latter. Most so-called investors including a large proportion of professional fund managers are, on closer inspection, speculators who invest with little knowledge of fundamental value and a slim-to-negative margin of safety.
Unfortunately, those trying to get rich quick without paying heed to fundamentals lose over the long term as major losses wipe out short term gains. Graham introduces a few basic filters and analytical methods to assist in picking safe "value" stocks which should help the investor to avoid big losses and generate superior returns.
Throughout the book, Graham explains where most investors go wrong and with what forms of temptation one must continually deal. Indeed he does this at such great length that some might find the book boring and long-winded. However, in my opinion it is time well spent as the ability to maintain process discipline is the biggest differentiator between investors over the long term. Maybe I'm more interested than most, but for me, it was a page turner.
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And there are some radical ideas, despite it's age, that fly in the face of "conventional wisdom". The most important example in my opinion was the idea of how much risk you should have in your investments:
The "risk"
And there are some radical ideas, despite it's age, that fly in the face of "conventional wisdom". The most important example in my opinion was the idea of how much risk you should have in your investments:
The "risk" you take on, in terms of volatility and uncertainty, should not depend on how close you are to retirement, but rather how much time you can spend on researching your investments. If you don't want to spend time, take safe investments, like index funds mutual funds, and blue chip stocks that pay regular dividends. If you are willing to do research, and keep current, it makes sense to invest less diversely and include higher risk stocks.
If value investing had a holy book of scripture, this would be it! Not only was Ben Graham's timeless investment advice unassailable, but the commentary's after each chapter by Jason Zweig were current and refreshing.
While I learned and re-learned many truths with this book, some of the most valuable ideas were to distinguish between "investing" and "speculation." Graham asserts that most of what is called investing today would be more accurately named speculation. Also
The value investors Bible.If value investing had a holy book of scripture, this would be it! Not only was Ben Graham's timeless investment advice unassailable, but the commentary's after each chapter by Jason Zweig were current and refreshing.
While I learned and re-learned many truths with this book, some of the most valuable ideas were to distinguish between "investing" and "speculation." Graham asserts that most of what is called investing today would be more accurately named speculation. Also his insistence on a "margin of safety" is timeless truth. Always insist on a large enough margin between price paid and value of an enterprise (and it's stock) so that if things go wrong, you won't lose your principle.
Graham is truly a modern prophet calling all speculators to a higher level of investing. Funny that the wisdom here is framed in investing language but, it's applicability reaches into just about every part of our lives if we'll open up to it.
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The other Idea is the emotional Mr. Market. The stock market as a speculative investment is a zero-sum game, and Mr. Market plays the role of the crazy trader who trades stocks at a different price everyday. Of course, the book encourages investing for the long t
The central Idea that I got from this book is that an Index Stock Fund outperforms other equity funds on a historical basis. And sometimes it outperforms active investing too. And from my wife's portfolio of 5 years, it seems to be true.The other Idea is the emotional Mr. Market. The stock market as a speculative investment is a zero-sum game, and Mr. Market plays the role of the crazy trader who trades stocks at a different price everyday. Of course, the book encourages investing for the long term where the stock value grows along with the economy. But for active investors, it is recommended that they study Mr. Market's price variations and invest in their preferred stock at their lowest price.
Investment here is also specifically mentioned to be different from trading or speculating. Some may call it 'Fundamental' investing and what it means is just that one must study the company's fundamentals (financials/management) before selecting it for investment. Normally the investment would be long term and the only time to sell is if the company's direction or management does not fit with investor's requirements anymore.
Lastly, the book introduces the concept of Margin of Safety. Of course, the writer puts this concept in context of the Great Depression of the 1930s. The idea is that even if a stock looks cheap on paper, you still can get screwed by the irrational Mr. Market who prices it lower and lower. So a stock that looks borderline cheap is not good enough. Ben Graham recommends to have a bigger Margin of Safety and buy it really cheap. It will help with the sleeping soundly at night too. It is the result of living through the Great Depression and it is a lowering of one's risk to the point where the returns will be quite limited too.
For a basic course in investing, one cannot go wrong with this book, BUT for normal readers, the writing style might be a bit archaic. It IS written quite a long time ago. For those who have read this book, they will have the basics to invest but in order to get a better return, they must next read Common Stocks and Uncommon Profits.
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In this book, Graham makes his opinion on technical analysis clear. He notes that the one principle that applies to nearly all "technical" approaches is that one should buy because a stock or the market has gone up and sell because it has declined. He says this is th
I read Benjamin Graham's "Security Analysis" prior to reading "The Intelligent Investor," and while the earlier book is much more detailed and considerably longer than this one, Graham has captured all the important information here.In this book, Graham makes his opinion on technical analysis clear. He notes that the one principle that applies to nearly all "technical" approaches is that one should buy because a stock or the market has gone up and sell because it has declined. He says this is the exact opposite of sound business sense.
He then goes on to explain his philosophy of investing, which is to buy stocks and bonds at a discount to their intrinsic value. By including a margin-of-safety at the time of purchase, an investor does not have to rely on accurately forecasting what the future will bring.
Graham spends a lot of time addressing separate strategies for "defensive" as opposed to "enterprising" investors. He notes the majority of security owners should be defensive (i.e. passive) because they don't have the time or the determination to treat investing as a quasi-business. The stock selection strategies for defensive investors are much more strict than those for enterprising investors, because the latter can spend more time evaluating the quantitative and qualitative characteristics of the companies in which he or she may wish to invest.
I would highly recommend this book to anyone interested in long-term investing. It provides a great foundation for any value-based investing strategy.
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And for those feeling that what's going on in the stock market today is completely exceptional - read this book - in some shape or form, it's all happened before.
The book laid out a pretty good case for "value investing" and trie
The main value of this book for me was it's age. The original book was published in 1949, after the shocks of Great Depression and WWII, revised in the 1970s after the energy crisis and had a commentary from Jason Zweig from early 2000s reflecting on the dot-com crash.And for those feeling that what's going on in the stock market today is completely exceptional - read this book - in some shape or form, it's all happened before.
The book laid out a pretty good case for "value investing" and tried to demonstrate basic analysis of company financials to determine the value of their stock. The analysis part made me realise that the time, effort and financial skill required to successfully do quality analysis for the stock value for hundreds of companies is probably beyond the time and attention that I can commit.
It meshes nicely with Jack Bogle's book about index funds on many of the basic points: it's very difficult to "beat the market", but reasonably possible to get the same returns as the market, costs (and losses) cumulate as well as gains, do not get carried away with the buy-sell frenzy and short-term emotions and sentiments on the market.
The specific tips and tricks felt a bit outdated - a lot of space was committed for specific types of bonds (US railroads, etc), very little about index funds and ETF-s.
I loved one GoodReads user's review this book _"1 star. This book sucks! I read it all I learned was that I should not invest into any of the popular stocks in the market today"_ Well, duh!
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There are some great things to learn in this book but I feel it's a bit one sided and not very worldly if you will. Really looks at one side of the coin instead of showing everything and letting you decide. This is something I also didn't really like
This book is so long and so dry it's taken me foreverrrrrr to get through it... I put it down so many times and forced myself to open it back up. The delivery is just so f'n borin lol and also it's so old and some of it isn't even relevant anymore.There are some great things to learn in this book but I feel it's a bit one sided and not very worldly if you will. Really looks at one side of the coin instead of showing everything and letting you decide. This is something I also didn't really like in the book.
Maybe it's because I had such high expectations of this book because it's literally on everyone's bookshelf lol but I'm going to give my book to charity and hopefully it strikes a chord with someone else.
lol I just checked and I didn't even take any notes on this book XD
Instead of reading this book just go watch YouTube summaries on it and you're good.
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As the fact that I left this book in the middle few month ago, and now picked it and finished the remaining portion of the book, so it was that I didn't enjoy the book, it was a bit boring, maybe I started this book without having any prior knowledge on the investing and stock market, but I would say that was the main reason that I wanted to read this book, to get myself familiar with the world of investing and stocks. Except few information, I don't find any I would give it a 3.5 out of 5 stars.
As the fact that I left this book in the middle few month ago, and now picked it and finished the remaining portion of the book, so it was that I didn't enjoy the book, it was a bit boring, maybe I started this book without having any prior knowledge on the investing and stock market, but I would say that was the main reason that I wanted to read this book, to get myself familiar with the world of investing and stocks. Except few information, I don't find anything relevant in the book for the layperson in stock markets, this maybe a book well suited for someone who already has the basic know how of stock market. I would come up with complete review after rereading the book in future. ...more
The secret to your financial success is inside yourself. If you become a critical thinker and you invest with patient confidence, you can take steady advantage of even the worst bear market. By developing your discipline and courage, you can refuse to let other people's mood swings govern your financial destiny. In the end, how your investments behave is much less important than how you behave.
All of
Ben Graham hoped every day to do "something foolish, something creative and something generous."The secret to your financial success is inside yourself. If you become a critical thinker and you invest with patient confidence, you can take steady advantage of even the worst bear market. By developing your discipline and courage, you can refuse to let other people's mood swings govern your financial destiny. In the end, how your investments behave is much less important than how you behave.
All of human unhappiness comes from one single thing: not knowing how to remain at rest in a room. - Blaise Pascal
Americans are getting stronger. Twenty years ago, it took two people to carry ten dollars' worth of groceries. Today, a five-year-old can do it. - Henry Youngman
"it's a whisker better"
The only thing you can be confident of while forecasting future stock returns is that you will probably turn out to be wrong.
Stay humble about your forecasting powers, and you will keep from risking too much on a view of the future that may well turn out to be wrong.
Lower your expectations -- but take care not to depress your spirit. Hope always springs eternal. In the financial markets, the worse the future looks, the better it usually turns out to be. A cynic once told GK Chesterton, the British novelist and essayist: Blessed is he who expecteth nothing, for he shall not be disappointed." Chesterton's rejoinder? "Blessed is he who expecteth nothing, for he shall enjoy everything."
Can you be brave, or will you cave?
Keep a minimum of 25% in bonds.
Human felicity is produc'd not so much by great Pieces of good Fortune that seldom happen, as by little Advantages that occur every day. - Benjamin Franklin
Familiarity breeds complacency.
It requires a great deal of boldness and a great deal of caution to make a great fortune; and when you have got it, it requires ten times as much wit to keep it. - Nathan Mayer Rothschild
Put up to 1/3 stock in foreign stocks (mutual funds)
Ronald Reagan used to say: Trust, then verify.
Getting to Know You
Determine whether s/he cares about helping clients or going thru the motions
Establish whether s/he understands fundamental principles of investing
Assess whether s/he is sufficiently educated and experienced to help you.
1) Why are you in this business - besides your alarm clock what gets you up in the morning?
2) What's your investing philosophy? (Do you use technical analysis? Market timing? - want 'no' answers to both of these questions)
3) Do you focus on asset management or also taxes, retirement, etc.
4) What needs do your clients have in common? Do you provide a checklist to monitor implementation of the financial plan?
5)How do you choose investments?
6) Do you accept any form of compensation from a third party when recommending investments? (If fees are >1%, shop for another adviser)
7) How many clients do you have, and how often do you communicate with them?
8) Can I see a sample account statement? (if you can't understand the explanation, not right)
9) How high an average annual return do you think is feasible? (over 8-10% is unrealistic)
10) Do you consider yourself financially successful? Why? How do you define financial success?
Provide me with your resume, your Form ADV, and 3 references.
Ever had a formal complaint filed against you? Why did the last client who fired you do so?
Would you tell me, please, which way I ought to go from here?
"That depends a good deal on where you want to get to," said the Cat. - Lewis Carroll, Alice's Adventures in Wonderland
You can get ripped off easier by a dude with a pen than you can by a dude with a gun. - Bo Diddley
7 Requirements for Portfolio
1. Adequate size
2. Sufficiently strong financial condition
3. Continued dividends for at least the past 20 years
4. No earnings deficit in the past 10 years
5. 10-year growth of at least 1/3 in per-share earnings
6. Price of stock no more than 1.5 times net asset value
7. Price no more than 15x average earnings of the past 3 years
Steady Eddies: Altria (formerly Philip Morris), Becton, Dickinson; Clorox, Dover Corp, 3M, JCI, P&G, Sigma-Aldrich, Walgreen Co, Rohm & Haas, Kimberly-Clark;Household Intl
It is easy in the world to live after the world's opinion; it is easy in solitude to live after our own; but the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude - Ralph Waldo Emerson
Warren Buffett: berkshirehathaway.com
The wisdom god, Woden, went out to the kind of the trolls, got him in an armlock, and demanded to know of him how order might triumph over chaos. "Given me your left eye," said the troll, "and I'll tell you." Without hesitation, Woden gave up his left eye. "Now tell me." The troll said, "The secret is, 'Watch with both eyes!'" - John Gardner
The thing that hath been, is that which shall be; and that which is done is that which shall be done; and there is no new thing under the sun. Is there any thing whereof it may be said, See this is new? it hath been already of old time, which was before us. - Ecclesiastes, I: 9-10
The most dangerous untruths are truths slightly distorted. - GC Lichtenberg
When you buy a stock, you become an owner of the company. Its managers, all the way up to the CEO, work for you. Its board of directors must answer to you. Its cash belongs to you. Its businesses are your property. If you don't like how your company is being managed, you have the right to demand that the managers be fired, the directors be changed, or the property be sold. "Stockholders should wake up." - Benjamin Graham
If we fail to anticipate the unforeseen or expect the unexpected in a universe of infinite possibilities, we may find ourselves at the mercy of anyone or anything that cannot be programmed, categorized, or easily referenced. - Agent Fox Mulder, The X-Files
Investors have never liked uncertainty -- and yet it is the most fundamental and enduring condition of the investing world. It always has been, and it always will be. At heart, 'uncertainty' and 'investing' are synonyms.
Graham loved the story of Ulysses, through the poetry of Homer, Alfred Tennyson, and Dante
"Consider the seeds from which you sprang: You were made not to live like beasts, but to seek virtue and understanding."
May your lifelong investing voyage be safe and confident as it is adventurous.
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Why is this such a good book? Well, the particular edition I have, with a preface by Warren Buffet AND a preface by Jason Zwieg AND individual chapter commentaries by Jason Zwieg, gives the reader the teaching of legendary investor from an earlier time P
I've been reading this book for ages, not because its boring or now worthwhile, but because it is so rich and detailed that I could only take it in small bites. (OK, and honestly, its so much easier to read escapist literature for entertainment!)Why is this such a good book? Well, the particular edition I have, with a preface by Warren Buffet AND a preface by Jason Zwieg AND individual chapter commentaries by Jason Zwieg, gives the reader the teaching of legendary investor from an earlier time PLUS the practical application of that teaching to current times. Its the full meal deal.
The book covers some history, a lot of investing fundamentals, and quite a bit of applied theory as well as investor psychology. There are case histories to study and apply the learning to. You cannot read it cover to cover and get the story. You have to go topic by topic like you would when learning any subject at school. The commentaries by Jason Zweig are particularly helpful because much of Graham's language and experience are from over 50 years ago and Zweig helps the 'student' interpret and understand the material in the context of today.
I'd highly recommend this book to anyone who really wants to understand more about investing and the markets.
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Для меня, человека, который вообще ничего не понимает в акциях и торговле на бирже, книга была немного сложновата при чтении, пришлось много гуглить по разным терминам и названиям компаний. Но все-таки, она была очень интересной и познавательной. Грехэм ялвяеться одним из величайших гуру в инвестировании. Чтоб подогреть немного интерес к его книге, стоит сказать, что у него учился один из величайших инвесторов современного мира - Уоррен Баффет, который единственным получил лучшую оценку от Грехема - А+. Баффет использовал подходы Грехэма при построении своей инвестиционной стратегии. (Русский) ...more
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