The Intelligent Investor Book Summary - The Intelligent Investor Book explained in key points

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The Intelligent Investor summary

Name: The Intelligent Investor
Rating: 4.4 (1041 reviews)
Author: Benjamin Graham and comments by Jason Zweig

Benjamin Graham and comments by Jason Zweig

The Definitive Book on Value Investing

4.4 (1041 ratings)

21 mins

Brief summary

The Intelligent Investor by Benjamin Graham is a classic investment guide that offers timeless wisdom, strategies, and principles for successful, long-term investing.

Topics

Investments

Table of Contents

The Intelligent Investor
Summary of 9 key ideas

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Key idea 1 of 9

What’s in it for me? Discover how to invest like Warren Buffett.

Have you ever thought about investing in the stock market? Many of us have given it serious consideration. Yet, most of us have been hesitant to take action due to the financial crises, burst bubbles and economic crashes we’ve witnessed.

However, there is a way to invest in the market that doesn’t leave you at risk of losing everything: intelligent investing. First outlined by Benjamin Graham in 1949, intelligent investing takes a longer-term, more risk-averse approach to the stock market. And it works.

In the decades since The Intelligent Investor was published, many have used Graham’s approach and made fortunes, among them, perhaps the most famous is Warren Buffett.

These blinks, based on Graham’s original advice, as well as comments from journalist Jason Zweig, show how you can become an intelligent investor yourself.

In these blinks, you’ll learn

why you should always ignore Mr. Market;
why it’s better to start your investment career with virtual money; and
why the cheapest stocks are sometimes the most valuable.

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.

Intelligent investing is broken down into three principles.

There are three principles that apply to all intelligent investors:

First, intelligent investors analyze the long-term development and business principles of the companies in which they’re considering investing before buying any stock.

Intelligent investors understand the importance of stock-market history.

The first thing you should do before you invest isn’t to look at a stock’s history. That’s important, sure, but what’s more important is looking at the history of the stock market itself.

Looking back through history reveals that the stock market has always been defined by regular ups and downs. Often, these fluctuations can’t be foreseen. The unpredictability of the market means that investors need to be prepared – financially and psychologically.

Don’t trust the crowd or the market.

To understand the whims of the market, it’s sometimes easier to imagine the entire stock market as being a person, let’s call him Mr. Market. As far as people go, Mr. Market is unpredictable, very moody and not very clever.

Mr. Market is easily influenced, and this causes him to have major mood swings. You can see this in practice in the way the market always swings back and forth between unsustainable optimism to unjustified pessimism.

The defensive investor’s portfolio should be well balanced, safe and very easy to manage.

When you start on the path of investing, it’s important that you pick a strategy that best matches you as an individual. You’ll need to decide whether you’re a defensive investor or an enterprising investor. Right now, we’ll focus on the defensive investor:

The defensive investor hates risks. Thus, safety is her main focus. This safety can only be achieved if she diversifies her investments.

Investing is easy when you follow the formula.

Once you’ve chosen the companies you want to invest in, then it’s time to congratulate yourself. Most of your work is now complete! Now all you have to do is determine how much money you want to regularly invest and check your stocks from time to time.

During this time, you will use a process called formula investing, in which you act strictly according to a predefined formula that determines how much money you will invest and how often. This approach is also called dollar-cost averaging, whereby you invest in a common stock every month or quarter and always with the same amount of money.

Enterprising investors start similarly to defensive investors.

To become a successful enterprising investor, you’ll want to employ many of the same strategies as defensive investors.

Just like a defensive investor, you will divide your funds between bonds and common stocks.

The enterprising investor doesn’t follow the market’s ups and downs.

If you own stocks and their price falls, do you sell them immediately or keep them? If another stock is rising, is it a good idea to get in on the action before it’s too late?

This approach, known as trading in the market, is typical of investors, because they fear that going against the flow will result in financial losses. An intelligent investor, however, knows better!

The enterprising investor has the chance to find real bargains.

By this point, the idea of becoming an enterprising investor should sound like a fun challenge. But is it really worth it to go through all this trouble of constantly checking your portfolio?

As a matter of fact, it is, since that’s where the best bargains lie — but only if you start smart.

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What is The Intelligent Investor about?

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.

The Intelligent Investor Review

The Intelligent Investor (1949) is a must-read for anyone looking to build wealth through smart investing. Here's why this book stands out:

It provides a solid foundation in value investing principles, helping readers make informed decisions.
The book emphasizes the importance of a long-term perspective for successful investing.
Its clear, concise explanations make complex investment concepts easily understandable.

Unlock the secrets of successful investing by picking up a copy of The Intelligent Investor today.

Best quote from The Intelligent Investor

Indeed, the investors chief problem — and even his worst enemy — is likely to be himself.

—Benjamin Graham and comments by Jason Zweig

Who should read The Intelligent Investor?

Anyone who wants to invest, but doesn’t want to risk losing it all
Investors who want to improve their performance
Anyone who wants be able to control his emotions in order to put all energy into investing

About the Author

Benjamin Graham (1884-1976) began his career as investor in 1914, after which he had to deal with substantial losses during the economic crash in the 1920s. His book The Intelligent Investor is a compilations of the lessons he learned as a young investor.

Categories with The Intelligent Investor

Money & Investments

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