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The Intelligent Investor

The Definitive Book on Value Investing

By Benjamin Graham and comments by Jason Zweig
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The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham and comments by Jason Zweig
Synopsis

The Intelligent Investor offers sound advice on investing from a trustworthy source – Benjamin Graham, an investor who flourished after the financial crash of 1929. Having learned from his own mistakes, the author lays out exactly what it takes to become a successful investor in any environment.

Key idea 1 of 10

Intelligent investors don’t rush in; they take time to rationally examine a company’s long-term value.

There is a lot of money to be made through investing. But also a lot to lose. Finance history is full of stories of investors like Warren Buffett, who, by investing in the right companies, earned vast amounts of money in return. There are just as many — if not more — stories of misfortune, in which people place the wrong bets and end up losing it all.

So, we have to ask ourselves: is investment really worth the risk? The answer is yes, it can be, so long as you follow the strategy of intelligent investing.

Intelligent investors use thorough analyses in order to secure safe and steady returns. This is very different from speculating, in which investors focus on short-term gains made possible by market fluctuations. Speculations are thus very risky, simply because nobody can predict the future.

For example, a speculator might hear a rumor that Apple will soon release a new hit product, and would then be motivated to buy lots of Apple stocks. If she’s lucky, then this knowledge will pay off and she’ll make money. If she’s unlucky and the rumor proves wrong, then she stands to lose a lot.

In contrast, intelligent investors focus on pricing. These investors buy stock only when its price is below its intrinsic value, i.e., its value as it relates to a company’s propensity for growth.

As an intelligent investor, you’ll buy a stock only if you believe there is a probable margin between what you pay and what you will earn as the company grows. Think of this margin of safety the same way you would if you were out shopping. An expensive dress, for example, is only worth it if you end up keeping it for a while. If the quality is insufficient, then you might as well buy a cheaper one that lasts for the same amount of time.

The life of an intelligent investor isn’t very exciting, but that’s not the point. The point is the profit.

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