on May 17, 2000
In the late 1960s, a high-flying mutual fund manager remarked on a talk show that "the trouble with old Ben Graham is he just doesn't understand today's market." That particular time was one of somewhat extreme valuations, especially in technology issues. Ben Graham was writing the 4th edition of this book at about that time. The parallels to our market today, as described by Graham, make for fascinating reading --whether or not one reads THE INTELLIGENT INVESTOR to become an unadulterated Grahamian. Although most readers come to this book to learn how to pick stocks with value, I think the historical perspective interwoven amongst the numbers makes it an especially worthwhile read.
Some readers complain about how dated the text is, but Ben Graham was writing for an audience witnessing the equity market hot-air bubble of the late sixties. The pop that followed in 1973 was no accident. Just recognizing the parallels between the high-flyers of that decade and those of our current market make this worthwhile reading. Likewise, readers who assimilate any of Graham's notions of value will heretofore comprehend Benjamin Graham's own inclination to plunge into the market when most investors were leaving it for dead in 1974.
Warren Buffett's lecture in the appendix ("The Superinvestors of Graham & Doddsville"), both a nice encapsulation of value investing and a refutation of the efficient market theory, is itself worth the price of the book. But there is much else in here that is worthwhile to the patient reader, who will likely return to Graham's ideas time and again in his/her investment career.
Warren Buffett introduced this edition of The Intelligent Investor by remarking that when he first read the book as an undergrad he thought then that it was the best investment book ever written, and many years later, after Benjamin Graham had died, Mr. Buffett still thought that The Intelligent Investor was the best investment book ever written, even today. After reading this extended meditation on caution before the stock market, hot tips, and pseudo-quantitative information, I have to concur with Mr. Buffett's assessment.
Although much has been said about this text, after reading it, I now feel that the great many that trumpet its merits simply do not understand its lessons or even its value. Many credit this book, and Graham and Dodd's earlier Security Analysis, for spawning the value investing movement. While true, this book represents something much more. It does not, as most people insist, put forth a quantitative approach to investing. That, unfortunately, is a gross distillation of some of the ideas contained in the book. Rather, it presents a way of thinking about investing, and emphasizes the approach to investing operations, especially with regard to safety, expectations and temperament.
Now some have criticized the book as being quite dated and irrelevant to today's fast moving and turbulent market, but these criticisms must be placed in proper context. This book was written in 1971 and was several revisions removed from the first edition, which appeared in 1949. Sadly, Mr. Graham passed away in 1976, and as such, this book, in its final revision, represents a kind of magnum opus written by a market observer who had seen more than his share of financial foolishness, from the stock markets of the Roaring Twenties to the drama and suspense of the Go-Go Sixties, with a few world wars, social upheavals, oil shocks and financial calamities added just to liven things up a bit. Furthermore, many have said that the examples are dated and no longer applicable, and to this I reply: change the dates and the company names and then ask yourself how the text reads.
Incidentally, every single tenet of modern-day financial planning is presented here, first, and many so-called 'financial innovations' (like the index fund) began as ideas rigorously considered in the text. Graham's ideas laid the foundation for indexing, now a popular way to invest, and he also gave what I believe to be the best treatment of the thorny problem of asset allocation.
However, with this text, Graham told the reader something that no one since has even dared to do today. He told the reader what he or she could reasonably expect to accomplish when taking certain courses of action with respect to investing. Moreover, he devoted a lot of space and thoughtful consideration, backed by both years of observation and experience, to what could go (horribly) wrong when investing. Every other book since has devoted lots of space to notable instances of things going right, playing these up as an incentive to divorce you from your funds.
There is a level of honesty and clarity throughout The Intelligent Investor that many looking to get rich quick will find both boring and intimidating. Paradoxically, the text won't make any sense to most readers until they've lost their shirts picking stocks. Only then will they be ready to read this book and understand what it has to say. Although Graham never tells you how to make a million, he offers good advice on how to keep your money. Nor does he tell you which stocks are the hot stocks, or even how to trade your way to wealth. What he does tell you, however, is to beware those who would substitute numerical extrapolations for hard evidence, and never allow boundless optimism to replace jaded caution. This book makes every attempt to show both sides of the coin, and you always get the whole picture, not just the better half.
In sum, anyone looking to invest with safety foremost in mind, and willing to think about the moves they make and the reasons for making them should read this book. For those looking to speculate, I can only say: in the long run, expect to lose money.
on March 18, 1999
This is the classic investing guide, made more famous by the success of Warren Buffet as he continues to follow Graham's thinking. Often, more money can be made in value investing than in today's popular day trading or in becoming a momentum player. The most valuable lesson I learned the first time I read this book is that minimizing losses is more important than trying to make large gains. Sometimes it is hard to sit and let your assets accumulate, but that is one of the principles of this book. Another is to learn how to evaluate and analyze a company to build the right portfolio, and to build a portfolio with only stocks that you really understand and a number that you can follow. There are also lessons here about when to buy. THE INTELLIGENT INVESTOR should be your first guide to investing, and your last as you review the principles often. It is also important to learn how to recognize companies that will continue to build value. For example, look for logical add-on businesses, or easy ways to expand through the same distribution channel, or serve the customer better. Another approach is to look for companies that are doing the right things. Look for companies that understand the importance of measuring and measure everything they can in the critical activities for success, go beyond today's best practices to develop both the future best practices and the ideal best practices, and then continually repeat the process for even better ideas. You can read more about this process in THE 2,000 PERCENT SOLUTION, a new book by Donald Mitchell, Carol Coles and Robert Metz that describes how to avoid the common stalls and continuously stay ahead of others.
on September 27, 2002
I am a firm believer in the concept of value investing and dollar cost averaging. Graham, the father of these concepts, outlines his viewpoints in a candid and frank manner and gives both novice and advanced investors a glimpse into his views of how to pick a good company and determine its value based on effective security analysis.
The book is a little dry at times and the material is somewhat dated. The last revision was in the early 70s so as such, don't look to it for good judgements as to which industry may be the one of preference since times have changed. But Graham's no nonsense approach to choosing stocks based on value, using dollar cost averaging and effective asset allocation are worth the price alone in my mind.
on October 1, 1999
"The Intelligent Investor" is good at convincing you not to pay too much for a stock. However, as Mary Buffett points out in her book "Buffettology", Warren Buffett gradually ran into problems with a pure Benjamin Graham approach to investing. Graham would buy ANY stock if it were cheap enough, hoping the price would soon rise. He often found that many cheap stocks never went up. He also incurred lots of capital gains taxes which Warren Buffett likes to avoid. It sounds like Buffett is more influenced by Philip Fisher now than by Ben Graham. I would recommend reading "Buffettology" before "The Intelligent Investor". After reading "Buffettology", then start reading books by Ben Graham, Philip Fisher, and John Burr Williams.
on July 15, 1999
A "must read". At the risk of being repetitive, the essay at the end by Warren Buffett is worth the cost of the book alone, as it reminds one that you can become enormously wealthy as a "value" investor, and how many different ways there are to be a "value" investor in the first place. You do not need to day trade internet stocks. You can make a lot of money buying sound companies at attractive prices and not spend all day logged on to your computer with your heart in your mouth. Graham's text helps bring home the principles needed to invest in this manner, particularly the "margin of safety" idea. I do not agree with the idea that long term investors should put 50% of their assets into bonds though.
This is very worthwhile reading. I'd also recommend David Dremen's books, "The Warren Buffet Way", and "What Works on Wall Street", as they are more "how to" oriented than this one.
on March 8, 2003
If you believe - as I have always believed - that the value approach is inherently sound, workable and profitable, then devote yourself to that principle. Stick to it, and don't be led astray by Wall Street's fashions, illusions, and its constant chase after that fast dollar.
Investing is most intelligent when it is most businesslike. After all, you are neither right or wrong when the market disagrees with you. You are right because your data and reasoning are right. True, there is safety in growth and some of us will go as far as to declare that there can be no real safety except in growth. But these sound to me like slogans than scientifically formulated and verified propositions. A case can be made for putting all your growth eggs in the best or relatively few best baskets.
If we assume that it is the habit of the market to overvalue common stocks which have been showing excellent growth or are glamorous for some other reason, it is logical to expect that it will undervalue - relatively, at least - companies that are out of favor because of unsatisfactory developments of a temporary nature. Focus on larger companies, for 2 reasons: First they have the resources in capital and brain power to carry them through adversity and back to a satisfactory earnings base. Second, the market is likely to respond with reasonable speed to any improvement shown.
Let me emphasize that it does not take a genius or even a superior talent to be successful as a value analyst. What it needs is, first, reasonably good intelligence; second, sound principles of operation; third, and most important, firmness of character.
Now, let me close with a few words of counsel from an 80-year-old veteran of many a bull and many a bear market. Do those things as analyst that you know you can do well, and only those things. If you're really good at picking stocks most likely to succeed in the next 12 months, base your work on that. If you can foretell the next important development in the technology, then concentrate on that activity, But in each case, you must prove yourself by honest, no-bluffing self examination and by continuous testing of performance that you have what it takes to produce worthwhile results.
[IF YOU GET THROUGH THE ABOVE YEARNING FOR MORE, THEN THIS BOOK IS FOR YOU. IT CERTAINLY IS FOR ME - MUCH BETTER THAN BETAS AND SELF-PROFESSED EXPERTS THAT VANISHED WITH THE BULL]
on December 19, 2002
Look, investing is a serious game. Mostly and exercise in self discipline and psychology. For the trader, the bear market=profits with all the volatility. For the investor, Benjamin Graham has laid down an evidence based argument for why value is the key aspect of investment decisions. There is no flaw with the methods espoused in this tome.
First of all, dollar cost averaging is praised(we dont know where the market is headed, as they tend to overextend themselves in either direction); at minimum a 25% allocation to bonds, even for the very young investor will allow rebalancing to take advantage of overvalued and undervalued markets.
Second, it provides valuable evidence as to why investors should not speculate.
Third, it emphasizes the importance of intrinsic value and lays out data which will convince you that "value" investing is not just the style right now, but the only method by which to invest for the buy and hold investor. E.g. run a screen of the best ten mutual funds of the last decade or so, most are large cap value.
Fourth, there is alot of free info on the internet. For the beginner the fool is the best site, however their books are long winded, when you have learned from their free stuff then use this text plus essays from warren buffet.
If you ever want to pay for advice fool and morningstar beat full service brokers hands down if you have the time and inclination.
This text is the best investing manual for the intermediate long term investor. Drawback? Outdated in the sense that in the last 30 years book value as a variable in intrinsic value calculations has lessened, and intellectual capital has become of increasing importance and is less easily measured.
E.G. pharmaceuticals. However, i view this as a slight knock.
The most important premise, psychology rules the markets, if you can catch market leader, with sustainable competitive advantage at a low intrinsic value price when all the risk factors are factored in, usually over the long run u will win.
This book is not a quick fix but a study of how to win...
on January 1, 1999
The Intelligent Investor by Benjamin Graham is a classic. Considered by many to be the father of value investing and modern security analysis, Benjamin Graham started working on Wall Street in 1914, a time when portfolio management was based more on unsupportable impressions and inside information. Benjamin Graham brought a disciplined and intelligent approach to the profession.
After reading The Intelligent Investor in his senior year at the University of Nebraska, Warren Buffett was so impressed that he traveled to New York to study with Benjamin Graham at Columbia University. Warren Buffett once said that he was "15 percent (Philip) Fisher and 85 percent Benjamin Graham." The training that Warren Buffett received from Benjamin Graham was critical to his success. If you read this book, you'll know why.
The Intelligent Investor's emphasis is on investment principles and investors' attitudes. Several comparisons of specific securities are included to demonstrate important elements in security selection. The book provides a guide to avoiding the loss of investment capital as well as identifying securities which are likely to provide superior returns with a margin of safety.
on April 18, 1999
This is a highly worthwhile read for the budding value investor, but not for the reasons stockpickers might anticipate. Whereas I expected to collect an arsenal of value-clinching techniques --there are a few of those-- from Graham through this text, what 'The Intelligent Investor' does best is offer a historical perspective to nutty stock-market valuations. Some readers complain about how dated the text is, but Ben Graham was writing for an audience witnessing the popping equity market bubble of the late sixties. The pop was no accident. Just recognizing the parallels between the high-flyers of that decade and those of our current market make this worthwhile reading. Also, Buffett's lecture in the appendix ("The Superinvestors of Graham & Doddsville") is itself worth the price of the book. But there is much else in here that is worthwhile to the patient reader, who will likely return to Graham's ideas time and again in his/her investment career.