Investing | The Intelligent Investor - Benjamin Graham (1949)

🐵 I. One-sentence Summary:

"The Intelligent Investor" is a comprehensive guide to investment strategies and techniques, with a focus on value investing, written by legendary investor and economist Benjamin Graham - Irving Kahn and Warren Buffet were his disciples.

1. Introduction to Investment

• Key Concept: The distinction between speculative and investment-oriented approaches to stock market participation.
• Graham argues that the stock market is primarily driven by speculation, but that intelligent investors should approach it with a more long-term, investment-oriented perspective.
• He also discusses the importance of having a clear investment philosophy and sticking to it, despite market fluctuations and emotions.

2. The Investor and Investment Objectives

• Key Concept: The importance of having clear investment goals and determining an appropriate investment strategy based on those goals.
• Graham emphasizes that investors should not focus solely on maximizing returns, but should consider other factors such as safety and liquidity in their investment decisions.
• He also discusses the importance of considering one's own unique financial situation, such as age, income, and investment time horizon, when setting investment goals and determining an investment strategy.

3. A Century of Stock-Market History

• Key Concept: The historical performance of the stock market and how it relates to future market trends.
• Graham provides an overview of the historical performance of the stock market over the past 100 years, including the impact of major events such as wars, economic recessions, and stock market crashes.
• He argues that while past performance is not a guarantee of future performance, a long-term perspective on the stock market can help investors make informed investment decisions.

4. General Portfolio Policy: The Defensive Investor

• Key Concept: The importance of diversification and avoiding over-reliance on individual stocks.
• Graham argues that the defensive investor should focus on creating a well-diversified portfolio of low-cost, low-risk stocks and bonds, rather than attempting to beat the market by making high-risk, individual stock investments.
• He also discusses the importance of regularly reviewing and adjusting one's portfolio to ensure it remains aligned with one's investment goals and risk tolerance.

5. The Defensive Investor and Common Stocks

• Key Concept: The importance of value investing and the criteria for selecting undervalued stocks.
• Graham outlines a value investing approach, which involves selecting stocks that are trading at a discount to their intrinsic value based on fundamental analysis.
• He provides specific criteria for selecting undervalued stocks, such as a low price-to-earnings ratio and a strong balance sheet.

6. The Defensive Investor and Portfolio Policy

• Key Concept: The benefits and limitations of investment strategies such as dollar-cost averaging and market timing.
• Graham argues against market timing and instead advocates for a long-term investment approach, such as dollar-cost averaging, which involves making regular, small investments into the stock market.
• He also discusses the importance of maintaining a well-diversified portfolio, even during market downturns, to minimize risk and maximize returns over the long-term.

💯II. Key Takeaways:

1. The distinction between speculative and investment-oriented approaches to stock market participation: Investors should approach the stock market with a long-term, investment-oriented perspective rather than a short-term, speculative one.
2. The importance of having clear investment goals: Investors should determine their investment goals and determine an appropriate investment strategy based on those goals, taking into account factors such as their age
3. The importance of diversification: Graham emphasizes the importance of creating a well-diversified portfolio of low-cost, low-risk stocks and bonds, rather than making high-risk, individual stock investments.
4. The value of value investing: Graham outlines a value investing approach, which involves selecting stocks that are trading at a discount to their intrinsic value based on fundamental analysis.
5. The benefits of a long-term investment approach: Graham argues against market timing and instead advocates for a long-term investment approach, such as dollar-cost averaging, which involves making regular, small investments into the stock market.

📝 III. Quotes:

1. "The intelligent investor is a realist who sells to optimists and buys from pessimists."
2. "The stock market is filled with individuals who know the price of everything, but the value of nothing."
3. "Price is what you pay, value is what you get."
4. "The investor's chief problem – and even his worst enemy – is likely to be himself."
5. "The individual investor should act consistently as an investor and not as a speculator."

🪞 IV. Other suggested references: