Intelligent Investor is a book that was written by Benjamin Graham back in the year 1949. The readers of the book who are mostly investors, amateur and professionals have become best in mastering stock investment. The Intelligent Investor book by Graham has more revised editions, which are very useful for investors across the Globe. Graham is considered to be the father of value analysis and security investing due his support and advices that he gave to big investors like Warren Buffett. Graham’s teachings in his book are considered to be legends of teachings and very important in value investing to all his students. The book has some historical context of fundamental investing principles that were used by various investors and led to their success (Graham 520, 2003).
What the book is about
Intelligent Investor is a book about how a normal investor matures to be an intelligent investor who is sure of how market timing is done and doesn’t speculate what is to happen. The investor should reasonably expect high returns of his work through controlling his emotions and at the same time staying away from IPOs. He should be focused and committed fully towards his business success (Graham 214, 2005).
Learning’s offered by the book
The book offers some learning whereby; it advises investors not be swayed away by market fluctuations rather they should have a long term perception of what to expect on their investments. Investors should realise in time that their learning’s are going to be proved wrong and should keep a margin of safety to avoid overpaying for a given stock no matter the situation. Graham in his book teaches that a good investment is the one that promises safety of principles and adequate returns; hence, any investor should not mix investments and speculations in his mind whatsoever. According to Graham, it is a great myth to expect rates of returns in proportion to all the risk that is undertaken by and serious investor. The age of stock is not determined by ones portfolio, but the hard work employed by and given investor is all that determines the success of a business (Graham 214,2005). According to Graham, investors are classified into defensive and enterprising investors and they are determined by stock criteria. A defensive investor is the one who should have maximum investment and enjoy freedom from bother. Whenever the portion changes by more that 5 percent, the investor should rebalance his investment using both the debt and equity in his portfolio.
Type of themes
Investing with a margin of safety
Graham outlines three main themes in his book which are very useful to any upcoming investor. He advices investors to invest with at least a margin of safety; since, this strategy help to ensure that their investment incurs high returns and all risks of investments are down sized. Graham advices investors to purchase assets worth $1 for 50 cents due to value of his investments they are likely to enjoy even during uncertain times. When the market re-evaluates the stock, an investor will earn substantial profits from his investment; hence, the need to be more careful when investing (Instaread 5, 2015). Margin of safety is very good to investor due to the protection that it provides to them during downside whenever things do not work as per plans. Even in case the business filter, the margin of safety guarantees good returns to the investor as well as safety in buying and underlying business for much it worthy. Margin of safety ensures that the stock is chosen with a lot of care despite the discovery made by Graham that showed investor’s stock occurs infrequently. Graham valued business assets in his book because; he considered them to have high stable earnings from the liquid cash value they have. Graham considered many strategies in making things work out as planned and this is the reason he advised investors to be more aggressive towards their business success.
Expecting volatility and profit from it
According to Graham, investing in stock is like expecting high volatility in it and this is the reason as to why any intelligent investor will always greet downturns as a way of securing great investments. In this context, Graham used the analogy of ‘Mr Market’ to explain the theme more clearly for better understanding to all (Instaread 5,2015). According to Graham, he perceived ‘Mr Market’ as an imaginary business partner to each and every investor who was ready to be success in the investment industry. He explained that dealing with ‘Mr Market’ ensured that a daily price quote was offered to each investor in giving him a chance to buy or even sell a share of his business. When an investor happens to be depressed under for business prospects, he will tend to quote a low price to his business shares. Graham advised the investor never to let the views of ‘Mr Market’ to dictate their emotions rather they should only form estimates that are based on facts and also sound with rational examinations. However, graham gave alternatives to mitigate all the negative effects of market volatility experienced by investors. The first one was the dollar cost averaging, which could be achieved through buying regular intervals and investments all amounting to the same dollar. The second was investing in stocks and bonds, which guaranteed even distribution of the investors stock and the bond as well.
Knowing the kind of investor one was
Graham deemed it necessary to advice investors in knowing who first they were and he did this through clear distinctions of groups that were operational in the stock market (Dave 19, 2014). The investors were to make distinct choices in their time and be more committed in becoming the best among others. Graham explained the enterprising investor to be the most active and passive in their investment work. All the quality of services and products released to the market ought to be well equated whereby; this can best be done through having a 30 stock of the Dow Jones industrial average to guarantee returns of investment. Defensive investor is more successful than just an ordinary investor due to his commitment in investing in both the bond and stock market.
Graham’s investment ideas are for long term success to any investor who takes them seriously. Buying of stock is supposed to be based on the underlying value to help the investor get returns when the stock is viewed as an underlying value. It is good to learn the best as Graham advised for any investor who is willing and ready to improve on his skills accordingly. Graham was the first and the best teacher who gave more advices on what should be done to improve on investment value. This book is most valued in the society; since, it has helped many investors to be successful in their business. It is evident that Graham’s investments ideas do not run counter to conventional thinking and this is the reason as to why they are very useful to all investors globally.
Dave John. Benjamin Graham: The Father of Value Investing. CreateSpace Independent Publishing Platform. 2014
Graham Benjamin. Intelligent Investor: The Definitive Book on Value Investing – A Book of Practical Counsel. HarperBusiness; Revised edition. 2003
Graham Benjamin. Intelligent Investor: The Classic Text on Value Investing (Rough Cut ). HarperBusiness; New edition edition. 2005
Instaread. The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham and Jason Zweig | Key Takeaways, Analysis & Review. CreateSpace Independent Publishing Platform. 2015