The Intelligent Investor Book Summary

Book Summary

15 min

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Brief Summary

"The Intelligent Investor" is a renowned investment book by Benjamin Graham that provides timeless principles and practical guidance for investors to make informed decisions and achieve financial success. It emphasizes the importance of a disciplined approach, value investing, risk management, and long-term thinking.

About the Author

Benjamin Graham was a British-born American investor, economist, and progessor, and the "father of value investing", an investment approach he started teaching at Columbia Business School in 1928. He wrote two founding texts in neoclassing investing: Security Analysis (1934) with David Dodd and The Intelligent Investor (1949). He graduated from Columbia University at the age of 20. He founded the Graham Newman Partnership and worked on Wall Street as well as a teacher at Columbia University and eventually at the UCLA Anderson School of Management in Los Angeles. He had many successful disciples including Warren Buffet.

Topics

Money & Investments

The Intelligent Investor Book Summary Preview

Does the thought of investing intrigue you?

Are you wondering how people make big payouts with their investments?

Have you been timid to try investing money because of the current economy?

Well, have no fear, author of “The Intelligent Investor” Benjamin Graham is here to help you with your investing questions and woes.

According to Graham in order to keep your money in your wallet, it’s all about investing intelligently and strategically. It’s all about being patient.

Don’t expect quick wins! Slow and steady wins the race.

“On the other hand, investing is a unique kind of casino—one where you cannot lose in the end, so long as you play only by the rules that put the odds squarely in your favor.” - Benjamin Graham

Short-Term Gains Shouldn’t Be Your Goal

According to the Graham Plan that has been utilized since 1949, it is important to study the company before investing in it.

“You must thoroughly analyze a company, and the soundness of its underlying businesses, before you buy its stock; you must deliberately protect yourself against serious losses; you must aspire to ‘adequate’, not extraordinary, performance.” - Benjamin Graham

Many people focus on short-term gains based on the fluctuation of the market. This is not a sustainable way to earn a big pay-out through investments. The market is unpredictable, so by trying to study market patterns to theorize your investments, you risk losing your hard-earned cash.

Focus on Pricing

Intrinsic value is the calculated value of an asset. A smart investor will buy stock in a company when it is below the intrinsic value.

An intelligent investor should only buy a stock if there is some sort of profit to be had.

Buying a stock when it is above its intrinsic value may seem desirable because it looks as if the stock is doing really well. But, overtime the value will go down as people discover that the stock really isn’t worth as much as it was letting on. Think of it as a fading trend or a marketing hype! Ultimately, by buying a stock when it’s above its intrinsic value, you will end up losing money in the end.

The Three Principles

Analyze the Long-Term

Once again, it’s important to analyze the long-term potential of a company before investing. Investing takes time, so you want to put your focus on companies that will continue to grow and develop despite the effects of the current market.

Important things to look at while investigating a company for investment opportunities in the financial structure, the management quality, the pay to its employees, and of course, what part of the profit you will receive through an investment.

Protect Yourself Against Losses

It’s vital that you protect yourself against losses that you can’t afford.

You never want to put all your eggs in one basket, even if the company looks flawless. Some things such as tax evasion or fraud are out of your hands. These are situations that you can’t predict.

So, by investing in multiple companies at once, your money is in different places making it harder to lose everything at the same time.