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The Intelligent Investor, Rev. Ed: The Definitive Book on Value Investing by [Benjamin Graham, Jason Zweig, Warren E. Buffett]

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The Intelligent Investor, Rev. Ed: The Definitive Book on Value Investing Kindle Edition

4.7 out of 5 stars 40,115 ratings

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Editorial Reviews

Review

“The wider Mr. Graham’s gospel spreads, the more fairly the market will deal with its public.”

Excerpt. © Reprinted by permission. All rights reserved.

The Intelligent Investor CD

The Classic Text on Value InvestingBy Benjamin Graham

HarperAudio

Copyright © 2005 Benjamin Graham
All right reserved.

ISBN: 9780060793838

CHAPTER ONE

Investment versus Speculation: Results to Be Expected by the Intelligent Investor



This chapter will outline the viewpoints that will be set forth in the remainder of the book. In particular we wish to develop at the outset our concept of appropriate portfolio policy for the individual, nonprofessional investor.

Investment versus Speculation

What do we mean by "investor"? Throughout this book the term will be used in contradistinction to "speculator." As far back as 1934, in our textbook Security Analysis,1 we attempted a precise formulation of the difference between the two, as follows: "An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

While we have clung tenaciously to this definition over the ensuing 38 years, it is worthwhile noting the radical changes that have occurred in the use of the term "investor" during this period. After the great market decline of 1929-1932 all common stocks were widely regarded as speculative by nature. (A leading authority stated flatly that only bonds could be bought for investment.2)

Thus we had then to defend our definition against the charge that it gave too wide scope to the concept of investment.

Now our concern is of the opposite sort. We must prevent our readers from accepting the common jargon which applies the term "Investor" to anybody and everybody in the stock market. In our last edition we cited the following headline of a front-page article of our leading financial journal in June 1962:

SMALL INVESTORS BEARISH, THEY ARE SELLING ODD-LOTS SHORT

In October 1970 the same journal had an editorial critical of what it called "reckless investors," who this time were rushing in on the buying side.

These quotations well illustrate the confusion that has been dominant for many years in the use of the words investment and speculation. Think of our suggested definition of investment given above, and compare it with the sale of a few shares of stock by an inexperienced member of the public, who does not even own what he is selling, and has some largely emotional conviction that he will be able to buy them back at a much lower price. (It is not irrelevant to point out that when the 1962 article appeared the market had already experienced a decline of major size, and was now getting ready for an even greater upswing. It was about as poor a time as possible for selling short.) In a more general sense, the later-used phrase "reckless investors" could be regarded as a laughable contradiction in terms-something like "spendthrift misers" -- were this misuse of language not so mischievous.

The newspaper employed the word "investor" in these instances because, in the easy language of Wall Street, everyone who buys or sells a security has become an investor, regardless of what he buys, or for what purpose, or at what price, or whether for cash or on margin. Compare this with the attitude of the public toward common stocks in 1948, when over 90% of those queried expressed themselves as opposed to the purchase of common stocks.3 About half gave as their reason "not safe, a gamble," and about half, the reason "not familiar with." It is indeed ironical (though not surprising) that common-stock purchases of all kinds were quite generally regarded as highly speculative or risky at a time when they were selling on a most attractive basis, and due soon to begin their greatest advance in history; conversely the very fact they had advanced to what were undoubtedly dangerous levels as judged by past experience later transformed them into "investments," and the entire stock-buying public into "investors."

The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is a cause for concern. We have often said that Wall Street as an institution would be well advised to reinstate this distinction and to emphasize it in all its dealings with the public. Otherwise the stock exchanges may some day be blamed for heavy speculative losses, which those who suffered them had not been properly warned against. Ironically, once more, much of the recent financial embarrassment of some stock-exchange firms seems to have come from the inclusion of speculative common stocks in their own capital funds. We trust that the reader of this book will gain a reasonably clear idea of the risks that are inherent in common-stock commitments-risks which are inseparable from the opportunities of profit that they offer, and both of which must be allowed for in the investor's calculations.

What we have just said indicates that there may no longer be such a thing as a simon-pure investment policy comprising representative common stocks-in the sense that one can always wait to buy them at a price that involves no risk of a market or "quotational" loss large enough to be disquieting. In most periods the investor must recognize the existence of a speculative factor in his commonstock holdings. It is his task to keep this component within minor limits, and to be prepared financially and psychologically for adverse results that may be of short or long duration.

Two paragraphs should be added about stock speculation per se, as distinguished from the speculative component now inherent in most representative common stocks. Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook. More than that, some speculation is necessary and unavoidable, for in many common-stock situations there are substantial possibilities of both profit and loss, and the risks therein must be assumed by someone. There is intelligent speculation as there is intelligent investing.But there are many ways in which speculation may be unintelligent...

1. Benjamin Graham, David L. Dodd, Sidney Cottle, and Charles Tatham, McGraw-Hill, 4th. ed., 1962.

2. This is quoted from Investment and Speculation, by Lawrence Chamberlain, published in 1931.

3. In a survey made by the Federal Reserve Board.



Continues...
Excerpted from The Intelligent Investor CDby Benjamin Graham Copyright © 2005 by Benjamin Graham. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

--This text refers to an alternate kindle_edition edition.

Product details

  • ASIN ‏ : ‎ B000FC12C8
  • Publisher ‏ : ‎ HarperCollins e-books; Revised ed. edition (March 17, 2009)
  • Publication date ‏ : ‎ March 17, 2009
  • Language ‏ : ‎ English
  • File size ‏ : ‎ 47312 KB
  • Text-to-Speech ‏ : ‎ Enabled
  • Screen Reader ‏ : ‎ Supported
  • Enhanced typesetting ‏ : ‎ Enabled
  • X-Ray ‏ : ‎ Enabled
  • Word Wise ‏ : ‎ Enabled
  • Sticky notes ‏ : ‎ On Kindle Scribe
  • Print length ‏ : ‎ 640 pages
  • Customer Reviews:
    4.7 out of 5 stars 40,115 ratings

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Customer reviews

4.7 out of 5 stars
4.7 out of 5
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BhaveshB.O.T™
4.0 out of 5 stars 🔴#1 HONEST(Unbiased) REVIEW of The Intelligent Investor "Investment Book For Lifetime"
Reviewed in India 🇮🇳 on May 30, 2019
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4.0 out of 5 stars 🔴#1 HONEST(Unbiased) REVIEW of The Intelligent Investor "Investment Book For Lifetime"
Reviewed in India 🇮🇳 on May 30, 2019
*Edition: I found commentary very useful (though often distracting). If you are not a professional - you'll appreciate the commentaries and epilogue - read it first? It's very inspiring.

*Book: "You either get the idea in the first five minutes, or you don't get it at all", said Warren Buffet in the epilogue.
- I would add - you don't necessarily need to read all 550 pages, but you must read through the idea of value investing - and it will change your way of looking at the world.
- I always felt confused and amazed by listening to all the ridiculous fuzz that comes from the Wall Street through TV and the internet. The book explains why.

🔴Several rules I noted into my keep:
፨ - Investor buys the business [based on its price/value], speculator buys the stock [based on an absurd believe that he can foresee where the stock price will go].
፨ - The best way to earn adequate return without any trouble whatsoever is to invest into cheap (low maintenance cost) indexes; use dollar averaging (buy every month instead of once at a random point of time) for smoothing the luck involved.
፨ - For enterprising investor (willing to spend much more time), look for a diversified list of bargain issues (at least 30 issues, business values (i.e. net current asset and other related metrics) is below market cap)
፨ - During the bubble, hot industries and companies are getting overpriced. That could only be financed from somewhere. Partially that money are coming from well established old economy companies that lose the appeal. Thus, invest in such old economy companies while bubble grows, as soon as the bubble burst - undervalued companies would rise back.
፨ - Don't ever buy IPOs! (See chapter for compelling arguments)
፨ - Don't consider companies that do not pay dividends. Dividends - money firm pays you for providing capital, they belong to you. They cut a piece for reinvestment - payout ratio. If firm doesn't pay dividends - invest all into growth so you could profit later - that's a speculation. Moreover stock price would be more volatile because it should now rely on future rather than current prospects.

The Intelligent Investor, by Benjamin Graham, is probably the most important and influential value investing book ever written even Warren Buffet described it as “by far the best book ever written on investing”.

፨ If you could only buy one investment book in your lifetime, this would probably be the one.
፨ It had been 6 months since I last read The Intelligent Investor. I have enjoyed my personal “refresher course” in value investing.

🔴Objective of The Intelligent Investor Book
፨ Benjamin Graham’s objective was to provide an investment policy book for the ordinary investor.
፨ He succeeded in putting seemingly hard concepts into terms that could be understood and, more importantly, implemented by the average investor.
፨ The typical investor has a tendency to “follow the market” when they should be employing portfolio risk management strategies. Instead, Graham gives us an alternative based on fundamental stock analysis.

፨ The goal is to learn how to avoid the pitfalls of allowing our emotions to control our investment decisions. Rather, Graham provides the foundation for making businesslike decisions.

🔴The Intelligent Investor puts special emphasis on teaching:
1. Risk management through asset allocation and diversification.
2. Maximizing probabilities through valuations analysis and margin of safety.
3. A disciplined approach that will prevent consequential errors to a portfolio.

🔴If you have any Doubt regarding this Review or this Product, then Feel Free to Contact me or Just ask me by commenting below.I Hope this Review was Helpful.Write reviews, help others, happy shopping.
Thank You for Reading this Review.
-●➽ʙʜᴀᴠᴇsʜ ʙ.ᴏ.ᴛ 🔥
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1,978 people found this helpful
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B.Sudhakar Shenoy
5.0 out of 5 stars Investing is more a matter of ‘character’ than ‘brain’
Reviewed in India 🇮🇳 on August 14, 2018
684 people found this helpful
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Indranil Dey
5.0 out of 5 stars paper quality all of this book is very good.
Reviewed in India 🇮🇳 on November 17, 2017
Customer image
5.0 out of 5 stars paper quality all of this book is very good.
Reviewed in India 🇮🇳 on November 17, 2017
Little hard to understand for beginners. Otherwise this book is a jewel of investing.
Printing, font size, paper quality all of this book is very good.
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308 people found this helpful
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Matt Bourne
4.0 out of 5 stars A must for anyone curious about investing...
Reviewed in the United Kingdom 🇬🇧 on September 20, 2018
101 people found this helpful
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Amazon Customer
5.0 out of 5 stars A great read for a 28-year-old
Reviewed in Canada 🇨🇦 on February 10, 2018
206 people found this helpful
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