Summary: The Intelligent Investor

Review and Analysis of Graham's Book

BusinessNews Publishing

• Publisher: Must Read Summaries
• Year: 2016
• ISBN:
  9782806229748
• Topic: Personal Development
• Subtopic: Personal Finance

The must-read summary of Benjamin Graham's book: `The Intelligent Investor: The Classic Text on Value Investing`

This complete summary of the ideas from Benjamin Graham's book `The Intelligent Investor` outlines the behavior of the intelligent investor and the right attitude to adopt when one considers investing. Moreover, this summary gives you the six principles at the core of intelligent investing, thus providing you with all the tools to become a successful investor yourself.  

Added-value of this summary: 
• Save time 
• Understand the key concepts 
• Expand your business knowledge 

To learn more, read `The Intelligent Investor` and choose your investments wisely. 

Summary of The Intelligent Investor (Benjamin Graham)

Principle #1: Know the business you’re investing in.

Before you even consider investing in a business, get to know what it sells, how it operates and what it does to make money. Until you have a good feel for a firm’s competitive environment, its challenges and opportunities and its strengths and weaknesses, you don’t really know enough to be investing in that business. Get up to speed before you invest, not after.

“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

– Benjamin Graham and David Dodd, Security Analysis

To invest in something rather than just speculating and hoping for the best, there needs to be a rational reason for your actions. There are a very large number of potential investments you can select from and it is only by careful and thorough analysis you can choose one investment over another logically and consistently.

Sound investments appreciate in value over time because of their long-term business operations rather than as a result of coming into market favor. The key is to accurately appraise the future possibilities of the company in question. You have to know enough to be able to make “an educated guess” about future financial results. This is only feasible if you understand in some detail what the company does and how it plans on generating profits in the future.

Note intelligent investors will be alert and businesslike as much after they become security owners as they were in making the decision to buy a particular stock. The bulk of the real money in any investment will be made by those who own and hold a security over time, receiving interest (in the case of bonds) or dividends (in the case of stock) therefrom combined with a share of the long-term increase in value. Investors need to think like owners rather than dealers or traders. Their major energies need to be focused towards assuring themselves of the best possible operating results by:

• Appointing fully honest and competent managers.
• Doing everything possible to improve bad management.
• Actively participating in the stockholder - management relationship.

“The genuine investor in common stocks does not need a great equipment of brains and knowledge, but he does need some unusual qualities of character.”

– Benjamin Graham

“Do not try to make ‘business profits’ out of securities – that is, returns in excess of normal interest and dividend income – unless you know as much about security value as you would need to know about the value of merchandise that you proposed to deal in or manufacture.”

– Benjamin Graham

“Since anyone – by just buying and holding a representative list – can equal the performance of the market averages, it would seem a comparatively simple matter to ‘beat the averages’; but as a matter of fact the number of smart people who try this and fail is surprisingly large.”

– Benjamin Graham

Investors come in two major classes:

1. Defensive investors want to conserve their investment capital first and foremost. They place a high premium on avoiding serious mistakes or losses. They also want to avoid having to make decisions too frequently and therefore will look for long-term investments that will grow and appreciate with minimal effort.
   Defensive investors will typically buy a mix of:
   • United States Savings Bonds or other nontaxable securities
   • A diversified list of leading common stocks
   • Shares in leading investment funds
2. Aggressive or enterprising investors are willing to devote more time to managing their investments and making investment decisions. They will take the time to analyze everything about a business and get to know it thoroughly before deciding to invest.
   Aggressive or enterprising investors will buy a mix of:
   • United States Savings Bonds or other nontaxable securities
   • A diversified list of leading common stocks
   • Shares in leading investment funds
   • Growth stocks which will grow faster than everyone else
   • Common stocks whenever the general market is low
   • Corporate bonds and preferred stocks at bargain levels
   • Some exceptional convertible issues

Note there are some types of investments intelligent investors will not buy, specifically:

• Low-yield corporate bonds or preferred stock.
• Foreign government issues.
• Leading common stocks whenever the market is at a historically high level.
• Secondary common stocks – unless they are offered at an exceptionally low price.
• New issues of common stocks – unless they offer as good a combination of income and safety as is obtainable by U.S. Savings Bonds and the common stocks of leading corporations at normal market prices.

“Investors as a whole are not and cannot be dealers or traders in securities. They are owners of the country’s larger enterprises. They m...

Table of contents

• Title page
• Book Presentation
• Summary of The Intelligent Investor (Benjamin Graham)
• About the Summary Publisher
• Copyright