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. View all 13 comments. Nov 09, David rated it really liked it Shelves: economics , non-fiction , owned. 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.
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 Warre Okay, this is the book to read if you are serious about investing in stocks. 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. View 1 comment. Dec 02, Tim Chang rated it really liked it. To be honest, the commentary and footnotes of this book were more useful to me than the original content. The book in its original form is obviously outdated in terms of the specific examples it gives for ways to invest and the different companies it details.
However, the commentary by Jason Zweig draws from the fundamental messages behind the book to provide more up-to-date advice on how to invest. Undoubtedly, Benjamin Graham provided the foundation for the commentary with his book, but I pers To be honest, the commentary and footnotes of this book were more useful to me than the original content. Undoubtedly, Benjamin Graham provided the foundation for the commentary with his book, but I personally found Zweig's portions easier to read and relate to.
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.
Sep 08, Chchchch rated it did not like it. To be honest, I have never seen such a terrible book. Actually, it is too expensive for me to afford this book because it cost me almost all my pocket money. But it doesn't worth such much money. When I am reading this book, I can't see anything about investing. I even don't believe the author can speak English. There are so many stupid mistakes like spelling mistakes and grammar mistakes.
And through the articles that Benjamin Graham wrote, To be honest, I have never seen such a terrible book. And through the articles that Benjamin Graham wrote, I can't imagine that he is the father if value investing. There is little doubt that this book is just rubbish. And nobody can invest well if they read this book. This book is just rubbish and the author is really stupid. I really want to throw this stupid book away and burn all the books that this author wrote.
View all 12 comments. Jan 07, S. Ach rated it really liked it Shelves: business-management-economics , finance-investment. Warren Buffet calls out, " this is by far the best book on investing ever written. Not for traders. 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. View 2 comments. Jun 21, Maciej Nowicki rated it really liked it. Intelligent Investor by many is considered to be the best book on value investing that you will ever read. 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 begi Intelligent Investor by many is considered to be the best book on value investing that you will ever read. At the beginning of the book, Graham outlines what he terms as investing as opposed to speculation.
In other words, invest only if you would feel comfortable to hold the stock in the future without seeing the fluctuating prices. 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. 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 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 Feb 24, Q. Pi rated it really liked it. I saw that Benjamin Graham was Buffet's professor at Columbia and one of his closest friends.
In fact Buffet named one of his kids after Graham. The Intelligent Investor teaches the philosophy that Buffet learned at school and went on to find massive success with. It does not teach people to ride market waves or speculate. Instead it instructs those who follow its teachings to calculate the intrinsic value of companies, find the ones that are either under priced or successful, but proven to have I saw that Benjamin Graham was Buffet's professor at Columbia and one of his closest friends.
Instead it instructs those who follow its teachings to calculate the intrinsic value of companies, find the ones that are either under priced or successful, but proven to have long term proven success capabilities, and then create a portfolio with those.
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. Nov 07, Jason Navallo rated it it was amazing. This is an amazing book. I read it when I was 13 and what I've learned has stuck in my head ever since.
It changed my whole way of thinking about the stock market and investing in general. View all 3 comments. Jul 09, Scott Dinsmore rated it really liked it. 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 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. 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. 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. These principles are something that, no matter what the circumstances, is never to be broken. 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.
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.
Jan 22, Joseph rated it really liked it. 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. This book is amazing. It is definitely a must read for investors in stock markets. It is not only a "book", it is a "reference". 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: , , Finally, I want to thank B. And W. 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.
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. 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.
Before selecting a stock, understand the company, protect yourself against serious losses, and aspire to "adequate" not extraordinary performance. Protect yourself against inflation by purchasing TIPS. Never predict stock's future return by extrapolating from the past solely. Strive to be cautious. 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. Oct 06, Sarthak Pranit rated it it was amazing Shelves: re-readers , non-fiction , bill-gates-says , charlie-munger-says. 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 sit To say that this book is a heavy piece of work is like saying, obesity is not a problem in the US. Security Analysis enumerates several examples where the market under-valued certain out-of-favor stocks which ended up being important opportunities for the savviest investors.
These and other concepts, including "margin of safety" and "period of financial distress", helped to lay the groundwork for Graham's later work in The Intelligent Investor and helped to pioneer some of his pivotal investing concepts.
Graham, along with David Dodd, began teaching value investing as an investment approach at Columbia Business School in Here are some of the key concepts from the book.
Graham's favorite allegory was that of Mr. This imaginary person, "Mr. Market," turns up every day at the stockholder's office offering to buy or sell his shares at a different price. Sometimes the proposed prices make sense, but other times, the proposed prices are off the mark, given current economic realities. Individual investors have the power to accept or reject Mr. Market's offers on any given day, giving them a leg up over those who feel compelled to be invested at all times, regardless of the current valuation of securities.
It is most advisable for an investor to concentrate on the real-life performance of their companies and the dividends they receive, rather than paying attention to the changing sentiments of Mr. Market as determining the value of the stocks. An investor is neither right nor wrong if others share the same sentiments as them; only facts and analysis can make them right.
Value investing is deriving the intrinsic value of a common stock independent of its market price. Analyzing a company's assets, earnings, and dividend payouts can help identify the intrinsic value of a stock, which can then be compared to its market price.
If the intrinsic value is more than the market value—in other words, the stock is undervalued in the market—the investor should buy and hold until a mean reversion occurs.
The mean reversion theory holds that over time, the market price and the intrinsic price will converge. At this point, the stock price will reflect its true value. Purchase only stocks that are trading at two-thirds of their net-net value.
Net-net is a value investing technique developed by Benjamin Graham in which a company is valued based solely on its net current assets. When an investor buys a stock at a price less than its intrinsic value, they are essentially purchasing it at a discount. Once the stock is actually trading at its intrinsic value, they should sell.
Graham also advocated for an investing approach that provides a margin of safety—or room for human error—for the investor. There are a couple of ways to accomplish this, but buying undervalued or out-of-favor stocks is the most important.
The irrationality of investors, the inability to predict the future, and the fluctuations of the stock market can provide a margin of safety for investors. Investors can also achieve a margin of safety by diversifying their portfolios and purchasing stocks in companies with high dividend yields and low debt-to-equity ratios. This margin of safety is intended to mitigate the investor's losses in the event that a company goes bankrupt.
Typically, Graham only purchased stocks that were trading at two-thirds of their net-net value, as a way of establishing his margin of safety. Net-net value is another value investing technique developed by Graham, where a company is valued based solely on its net current assets.
The original Benjamin Graham Formula for finding the intrinsic value of a stock was:. Later, Graham revised his formula to include both a risk-free rate of 4. Many of Graham's investment principles are timeless—they remain as relevant today as they were when he penned them.
Graham criticized corporations for their obscure and irregular methods of financial reporting that made it difficult for investors to get an accurate picture of the health of a company.
Graham would later write a book about how to interpret financial statements , from balance sheets and income and expense statements to financial ratios. Graham also advocated for companies paying dividends to their shareholders, rather than keeping all of their profits as retained earnings. About The Intelligent Investor , legendary investor Warren Buffett, who Graham famously mentored, described it as "by far the best book on investing ever written. He later worked for Graham at his investment company, the Graham-Newman Corporation, until Graham retired.
The price of a Warren Buffett-signed copy of The Intelligent Investor that sold at an auction in Graham's students all eventually developed their own strategies and philosophies, but they all shared the main principle of creating a margin of safety.
In general, Buffett follows the principles of value investing, which looks for securities whose prices are unjustifiably low based on their intrinsic worth. Buffett also considers company performance, company debt, profit margins, whether companies are public, how reliant they are on commodities, and how cheap they are.
Buffett's strategy differs from Graham's in that he stresses the importance of a business's quality, and he preaches the virtue of holding stocks for the long haul. Buffett doesn't seek capital gain. Rather, his goal is ownership in quality companies that are extremely capable of generating earnings; Buffett is not concerned that the stock market ever recognizes a company's value.
Even so, Buffett said that no one ever lost money by following Graham's methods. The Intelligent Investor is widely considered to be the definitive text on value investing. According to Graham, investors should analyze a company's financial reports and its operations but ignore the market noise. The whims of investors—their greed and fear—are what creates this noise and fuels daily market sentiments.
However, forecasting what the interest rate is going to look like in the future is risky. We can never know for sure what the figure will be in the future, but it might be worth considering the interest rates of the previous 20 years, and using them as a springboard to forecast what might be probable in the future. The more an investor begins to rely on the income gained from their portfolio, the greater their need to protect themselves from the unexpected. This means investing in the broader spread of both bonds and stocks.
These are:. To prevent us from taking such a purely historical-focused approach, Graham posits that we ask ourselves the following questions:. However, many investors fall into the trap of buying high because a stock seems secure, and then selling low when the stock inevitably falters. Ultimately, Graham states that the only thing an investor can be sure about when attempting to forecast future stock returns, is that they will probably turn out to be wrong.
The singular truth that history teaches us is that the future is unpredictable. Therefore, the key is to remain humble about your abilities to predict the future to prevent you from risking too much on it. The aggressiveness of your portfolio depends less on the kinds of investments you make, and more on the type of investor you are. Benjamin Graham states that there are two ways to be an intelligent investor:. Both approaches are equally smart, but your success in either one of them requires you to know which approach better suits your personality.
This is because you will need to stick with this approach for your entire investment lifetime and be able to keep both your emotions and your costs in check. For example, if you have plenty of time, are competitive, and enjoy an intellectual challenge, you might make for a better active investor.
Central to the Benjamin Graham formula of intelligent investing is to replace all guesswork and market predictions with discipline. Graham posits that how defensive you should be as an investor depends on how much time and energy you are willing to put into developing your portfolio. Still, given the volatility of the stock market, why would a defensive investor ever invest in stocks as opposed to bonds?
Because, as Graham mentioned in chapter two, due to the risk of inflation, to invest entirely in either stocks or bonds is to make yourself vulnerable. One of the biggest challenges that a defensive investor must combat is the belief that they can pick stocks without doing a lot of research beforehand. As psychologists at the Carnegie Mellon University showed, the more familiar an individual feels they are with a subject, the more likely they are to exaggerate how much they know about it.
This phenomenon can be seen in the likes of a countless number of investors buying shares in Amazon. By replacing familiarity with thorough research, these investors failed to see that the stocks they were buying were overpriced. Therefore, the more familiar a stock is, the more likely it is to turn an intelligent defensive investor into a complacent one.
The way a defensive investor both participates in and wins the race is by sitting still. Indeed, a defensive investor may even decide to purchase their stocks via a broker or a financial planner. In this chapter, Graham highlights some absolute essentials for those wanting to take the aggressive investor route. These include:. Graham puts forward four ways an aggressive investor will make their investments:. For an aggressive investor to make a sound investment, it must further be held accountable to the following two ideals:.
Graham suggests three investment approaches which conform to this two-fold criteria. They are as follows:. If we can take it as a given that the market habitually overvalues common stocks that have been showing remarkable growth, we can assume that it undervalues companies that are not performing quite as well.
The key here is for the intelligent investor to locate the larger companies that are going through a temporary period of uncertainty. This false record-keeping caused its stock to drop a considerable 16 percent in a single day.
Smart investors bought up these stocks. Secondly, you must evaluate the value of the business to a private owner which, again, is primarily worked out by projecting future earning potential. Graham refers to this approach as having courage within a depressed market by using the wisdom of value analysis.
To make such an acquisition possible, and to get the shareholders of the smaller company onboard, the stocks are nearly always offered at a price considerably higher than the current price. Therefore, any investor smart enough to purchase shares or bonds in a company that is perhaps nearing bankruptcy, and thus selling cheaply, but that may have a chance of being bought out and increasing its stock value, could make a lot of money.
For the majority of the time, the market accurately prices stocks, but occasionally, the price is significantly wrong.
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