The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham.

3/5 rating. 536 pages.

Book #12 of 2022. Read March 1, 2022.

This book is a classic in stock investing, as Graham is widely known as the father of value investing. There is a wealth of information in here. It deepened my knowledge on a lot of ideas, and confirmed the effectiveness of a lot of stock picking ideas. An amazing friend finally got me to read this gem.

Graham believes that for each stock that you buy you should always treat as if you are buying the entire company. In order to feel comfortable and know you are making the right decision to buy, you should find the intrinsic value of the company and ensure that you are paying a good price for a company with a proven track record.

Graham’s form of investing is not necessarily the most flashy, as you aren’t going to be gambling on IPO’s or whatever fad is in the market – since this is speculating and not actual investing – but Graham’s incredible returns over the long-haul show how protecting your downside, and choosing companies with a margin of safety will help you excel in the long-term. While everyone else has lost their shirts in the next bear market, you can feel confident in your picks and buy more stocks “on sale” to assure a successful future.

While I don’t expect people to actually read a 530 page book before investing, you should at least speak with someone who is knowledgeable about finance before plowing into the market. This is a great book, just hard to give basically a textbook more than a 3 as a rating.

Quotes:

“The sillier the market’s behavior, the greater the opportunity for the business-like investor.”

“A stock is not just a ticket symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.”

“No matter how careful you are, the one risk no investor can ever eliminate is the risk of being wrong. Only by insisting on what Graham called the ‘margin of safety’ – never overpaying, no matter how exciting an investment seems to be – can you minimize your odds of error.”

“The experts do not have dependable ways of selecting and concentrating on the most promising companies in the most promising industries.”

“Experience has taught us that, while there are many good growth companies worth several times net assets, the buyer of such shares will be too dependent on the vagaries and fluctuations of the stock market. By contrast, the investor in shares, say, of public-utility companies at about their net-asset value can always consider himself the owner of an interest in sound and expanding businesses, acquired at a rational price – regardless of what the stock market might say to the contrary. The ultimate result of such a conservative policy is likely to work out better than exciting adventures into the glamorous and dangerous fields of anticipated growth.”

“As Graham puts it, ‘while enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.’”

“By the time everyone decides that a given industry is ‘obviously’ the best one to invest in, the prices of its stocks have been bid up so high that its future returns have nowhere to go but down.”

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

“To enjoy a reasonable chance for continued better than average results, the investor must follow policies which are (1) inherently sound and promising, and (2) not popular on Wall Street.”

“All of human unhappiness comes from one single thing: not knowing how to remain at rest in a room.” – Blaise Pascal

“10% of our overall wealth is the maximum permissible amount to put at speculative risk.”

“Because of [J.P. Morgan’s] cast influence, he was constantly asked what stock market would do next. Morgan developed a mercifully sorry and unfailingly accurate answer: ‘It will fluctuate.’”

“For then, if another bull market comes along, he will take the big rise not as a danger signal of an inevitable fall, not as a chance to cash in on his handsome profits, but rather as a vindication of the inflation hypothesis and as a reason to keep on buying common stocks no matter how high the market level nor how low the dividend return.”

“Americans are getting stronger. Twenty years ago, it took two people to carry ten dollars’ worth of groceries. Today, a five-year-old can do it.” – Henny Youngman

“They must weigh our reasoning against the contrary reasoning they will hear from most competent and experienced people on Wall Street. In the end each one must make his own decision and accept responsibility therefore. We suggest, however, that if the investor is in doubt as to which course to pursue he should choose the path of caution.”

“The only thing you can be confident of while forecasting future stock returns is that you will probably turn out to be wrong.”

“And the corollary to that law of financial history is that the markets will most brutally surprise the very people who are most certain that their views about the future are right.”

“The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bring to bear on his task.”

“To obtain better than average investment results over a long haul requires a policy of selection or operation possessing a twofold merit: (1) It must meet objective or rational tests of underlying soundness; and (2) it must be different from the policy followed by most investors or speculators.”

“As an investor you cannot soundly become ‘half a businessman,’ expecting thereby to achieve half the normal rate of business profits on your fund.”

“The longer a bull market lasts, the more severely investors will be afflicted with amnesia; after five years or so, many people no longer believe that bear markets are even possible. All those who forget are doomed to be reminded; and, in the stock market, recovered memories are always unpleasant.”

“Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.”

“When asked what keeps most individual investors from succeeding, Graham had a concise answer: ‘The primary cause of failure is that they pay too much attention to what the stock market is doing currently.’”

“After all, the whole point of investing is not to earn more money than average, but to earn enough money to meet your own needs. The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go. In the end, what matters isn’t crossing the finish line before anybody else but just making sure that you do cross it.”

“In a series of remarkable experiments in the late 1980s, a psychologist at Columbia and Harvard, Paul Andreassen, showed that investors who received news updates on their stocks earned half the returns of investors who got no news at all.”

“In a poll taken in late 2000, Time and CNN asked more than 1,000 likely voters whether they thought they were in the top 1% of the population by income. Nineteen percent placed themselves among the richest 1% of Americans.” 

“In late 1997, a survey of 750 investors found that 74% believed their mutual-fund holdings would ‘consistently beat the Standard & Poor’s 500 each year’ – even though most funds fail to beat the S & P 500 in the long run and many fail to beat it in any year.” 

“Much bad advice is given free.” 

“[I]t would be time to amuse his thoughts with things in the clouds when he had seen to those at his feet.” 

“It is easy in the world to live after the world’s opinion; it is easy in solitude to live after our own; but the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude.” – Ralph Waldo Emerson

“First, though, it’s worth repeating that for most investors, selecting individual stocks is unnecessary – if not inadvisable. The fact that most professionals do a poor job of stock picking does not mean that most amateurs can do better. The vast majority of people who try to pick stocks learn that they are not as good at it as they thought; the luckiest ones discover this early on, while the less fortunate take years to learn it.”

“No matter which techniques they use in picking stocks, successful investing professionals have two things in common: First, they are disciplined and consistent, refusing to change their approach even when it is unfashionable. Second, they think a great deal about what they do and how to do it, but they pay very little attention to what the market is doing.”

“Wall Street has a few prudent principles; the trouble is that they are always forgotten when they are most needed.”

“The speculative public is incorrigible. In financial terms it cannot count beyond 3. It will buy anything, at any price, if there seems to be some ‘action’ in progress. It will fall for any company identified with ‘franchising,’ computers, electronics, science, technology, or what have you, when that particular fashion is raging.”

“At some point in its life, almost every stock is a bargain; at another time, it will be expensive. Although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go.”

“When you buy a stock, you become an owner of the company. Its managers, all the way up to the CEO, work for you.”

#theintelligentinvestor #benjamingraham #stocks #investing @prestonnpysh #booksread #bookreviews #booksthatmatter #finance

IG Link.