The Intelligent Investor, by Benjamin Graham is “The Definitive Book on Value Investing.”
The Intelligent Investor is one of my favorite stock investment books. And Warren Buffett also described The Intelligent Investor as the most influential investing book he has ever read. It actually prompted Buffett to seek out Benjamin Graham, take his course at Columbia Business School, and work for him at Graham-Newman Corporation. Pretty cool, right?
So is The Intelligent Investor the best investment book for you? Read this book review to get an in-depth book at all aspects of The Intelligent Investor and why it has stood the test of time.
Why The Intelligent Investor is a Must-Read:
The Intelligent Investor is an incredibly educational book that describes the concept of value investing. Value investing is the process of finding securities (stocks, bonds, preferred shares) that are trading below their intrinsic value – and it’s an investment approach that has proven to be very profitable over the years.
But The Intelligent Investor doesn’t just describe value investing…
The first section of The Intelligent Investor describes why common stocks generally make for a good investment over the long term, especially compared with “conservative” investments like corporate bonds and treasuries. Then Graham explains in detail how the passive intelligent investor can use indexing strategies to limit their risk and build wealth throughout their life. But The Intelligent Investor doesn’t stop there:
The next part of The Intelligent Investor describes the “enterprising” Intelligent Investor, who uses security analysis to find investments that are trading at a discount to the net asset value of the business. The Intelligent Investor lays out an in-depth framework for analyzing all types of investment opportunities so you can find stocks that fit the value investing criteria and are likely to provide you a long term return. Graham spares no detail in this section of The Intelligent Investor – and for that reason, this book marked a turning point in my own development as an investor.
By the way, The Intelligent Investor isn’t just some flashy new investment trend…
The Intelligent Investor was first published in 1949. And if you’re worried the book is a little out of date, you should know that a number of updates and new editions have come out. The 2006 edition of the book has a lot of additional commentary and explanatory notes from Wall Street Journal reporter Jason Zweig. So even though the fundamental lessons of The Intelligent Investor have stood the test of time on their own, this updated version makes the information even more topical for investing in today’s financial markets.
But let me tell you a little bit more…
The Best Part of The Intelligent Investor Book:
The Intelligent Investor covers a lot of ground – so it’s hard for me to touch on everything in this book review. The sections on security analysis are incredibly informative and filled with great examples and case studies. But that’s just the tip of the iceberg because…
In addition to the clear and focused value investment methodology The Intelligent Investor describes, Graham also provides a number of allegories and anecdotes that can help improve your internal investment decision making – and really boost your returns.
Let me tell you what I mean:
One of of my favorite parts of The Intelligent Investor is the story of Mr. Market. This is a simple allegory that describes stock market as an eccentric business partner who is always quoting you wildly fluctuating prices. Instead of being a servant to Mr. Market, you should aim to take advantage of his erratic fluctuations in security prices.
Along the same lines:
Graham recommends thinking of your stock market purchases as investments in private companies that you make for the long term because you see the value in the company. Like most of the advice in the book, Graham’s thoughts are simple but profound. They aren’t always easy to implement though – but it’s a good reminder that the hardest part of investing intelligently is maintaining our emotional composure.
It’s these easy to understand mental models that help make the quantitative lessons of The Intelligent Investor much more actionable and applicable for managing your own investment portfolio. There’s just one other thing I want to get out of the way…
The Intelligent Investor: One Word of Warning
The Intelligent Investor is not a day trading or swing trading book. This book is focused on tried and true investing and has nothing to do with technical analysis. So if you’re looking for a book that will help you find the next hot momentum stock, or a new tactic to play break-outs, you’re in for a sad surprise.
The Intelligent Investor is written for the fundamental investor who is interested in buying good companies at a discount to their tangible asset value. On the other hand, this Intelligent Investor framework can still work for longer term position traders. But it will help you focus only on trading those stocks that have a “margin of safety” and could also make sense as longer term holds.
The Intelligent Investor introduces you to an investment decision-making framework that can really make all the difference in your portfolio returns.
The Intelligent Investor – The Final Word:
The Intelligent Investor is a book that really stands out above most other stock trading books I’ve read. Graham was something of a revolutionary, and even though his book was published over 60 years ago, it has definitely stood the test of time. For example…
Although the Intelligent Investor methodology has been the focus of much criticism over the years, The Superinvestors of Graham & Doddsville continue to outperform any other investment approach. For this reason alone, I think The Intelligent Investor is worth buying on Amazon.