The Intelligent Investor by Benjamin Graham Book Review

The Intelligent Investor by Benjamin Graham is another best seller that has held true over the years that it has been out in print. The stock market changes constantly and there are up and downs, huge bear and bull runs, and disasters, stock market crashes and recessions around the corner. No one can fully predict the stock market, not even the brokers and the experts, but what people can do is minimize their risks. A huge amount of people lose money from the stock market, whether they are experts or not. The version I read was the most current edition with edits from Benjamin Graham himself highlighting some key factors which he thought wasn't emphasized enough in the previous editions and further examples of more current (at the time of editing) stock changes to show that what he said in the 1950's was still true. The version I read also had commentary after every chapter by Jason Zweig a student/employee/friend of Benjamin Graham. The commentary helped me a lot to digest what Graham was trying to say after every chapter.



The Intelligent Investor by Benjamin Graham Book review - Conclusion
How can a book about an ever changing and unpredictable thing such as the stock market be relevant over 50 years after its first publication? The answer is that things don't really change, things aren't as unpredictable as you think they are. Compared to most theories and strategies about the stock market, Benjamin Graham's has held true and outlasted the others. He gave core values in which you have to follow to beat the stock market, and it's still a bestseller. I admit I didn't digest all the information that was given in this book on the first read, it's a lot to take in, but after reading I felt I can approach the stock market with more confidence and belief in myself, not blind belief, belief from sound research and analysis and decisions. To fully understand everything that Benjamin Graham presents in this book you'll probably have to ready the book a few times and each time you won't regret discovering something new. If you feel your following a strategy in the stock market that you don't understand, check out this book, it will make things so much clearer, and although you may not be able to achieve instant stock market success your brain will be halfway programmed into thinking the right way

Key Points in the book:
A nice addition in the more recent editions with commentary is the analysis of other books and strategies and how they have broken down, these include:
- Cash in on the Calender
- What Works on Wall Street by James O'Shaughnessy -
Follow "The Foolish Four" ....... and many more......

Think with your brain not your emotions - i.e. Be and Intelligent Investor
This is a key point that is highlighted in nearly every business advice. For the stock market you need to take what everyone is saying and what you read with a pinch of salt, don't ignore it, but don't take is as the truth, the system is designed like a Casino, the house always wins, so the house will also lure you in with bold claims to get you rich quick, be patient and research before you dive in. The book gives an example of Sir Isaac Newton buying stocks and selling when he felt it would go bad, however, soon after this he bought back more stocks in the company at a higher price with the belief that it will increase further due to the fact that it was still increasing and the influence of his peers. In the end he lost £20,000 in that stock(over $3 million in today's money). This example was just to show that the most intelligent person in the planet was not an Intelligent Investor, he was influenced by his emotions. Be an investor not a speculator, if you feel tat your investment relies mostly on speculation, don't invest until you know enough to call it a real investment.


Minimise your risks
The basic principles to minimise risks when investing is:

Know your stock - You need to research the stock thoroughly and think about the risks of losing money. Check the financial reputation of the company and its underlying business. Benjamin Graham gave an example of airline stocks back in the 1970's, how it was a sure bet that the market would increase and air travel will become more and more common. This was true, however in many companies it was managed poorly and due to over expansion and other poor management, even though it became a huge business, it made a loss.

Check that the price that you are buying isn't too expensive. Analyse stock prices, what has influenced them in the past, what may influence it in the future, and set strict criteria in buying and selling.

You must protect yourself against serious loses - This is reduced by the first point, but if for example a natural disaster, a war or the stock market crashes, then you need to still be financially able. Depending on the situation you could sell before anything serious happens, or manage your stocks in a way that you will not be in debt if you lose it all. When people see a "hot stock", many confident and over enthusiastic players will borrow money to make the most of it, but this game has a even higher risk if you lose, you will be in even greater debt, this reminds me of the film James Bond film "Casino Royal" remember what happened to that guy?

Aspire to adequate profit - Don't get too greedy, analyse the market, have a target price and sell when appropriate. Think with your brain.

Another nice quote I found is:

"invest only if you would be comfortable

owning a stock even if you had no way

of knowing its daily share price"

Bonds and Shares and inflation
Benjamin Graham advises investors to aim to have equal amounts in bonds and shares, however, they must also change the percentages according to the market and other factors, for example when prices are high or low, or when inflation has an influence. If you've locked all your money in bonds and inflation rises then you could even make a loss from the bond, but that does mean stocks are always a better investment in the long run. Benjamin Graham explains how to make the judgment on how much to invest in bonds and shares in a detailed analysis.

Defensive investor vs Enterprising investor
The defensive investor as described in the book is the investor that will invest to make as little mistakes as possible and leave the stocks without looking at it's progress or researching changes that may occur. The enterprising investor is the opposite, they will research thoroughly, will check constantly, but will do high risk investments. Benjamin Graham devotes chapters of his book to analyse the psychology of both and risks and strategies that both need to be aware of.

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The Intelligent Investor