The Intelligent Investor By Benjamin Graham: Book Review and Summary 2022
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The Intelligent Investor by Benjamin Graham is one of the best investing books that is still being used by most successful investors, which includes Warren Buffett and other popular investors. Furthermore, this classic investing book has placed a huge influence on the millions of both newbies and advanced investors worldwide.
The key concept behind this book is mainly concentrated on the” value investing” principle in which the investors should have both analytical skills and mental fortitude to select the stock at a bargain price.
In other words, billionaire Warren Buffett, the Oracle of Omaha argues in the book that you do not need to have a super high IQ to become successful as a stock market investor. It’s because as long as you have a strong mental fortitude to stay in the game throughout the market turbulence and be able to make a rational decision in the stock market investment.
In this review, we will discuss the given 5 main areas from ” The Intelligent Investors by Benjamin Graham”, which will give you an overview picture of key principles behind this book. Hopefully, you should learn and get familiar with those key principles, and be able to apply them to your investing journey.
1. Are you an Investor or Speculator?
2. The concept of Value Investing and Intrinsic Value ( The Intelligent Investor)
3. The Warren Buffett Way
4. The Margin of Safety- A main focus on The Intelligent Investor
- Value investing and intrinsic value are the two key concepts of the intelligent investor.
- The margin of safety is also a critical point to learn.
- One of the best investing books for beginners to learn and develop an investing plan.
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1. Are You an Investor or Speculator?
Before moving to the main review of ” The Intelligent Investor by Benjamin Graham”, you should ask yourself the question ” Are you an investor or speculator?. Based on my experience, it’s one of the critical viewpoints to challenge yourself, which allows you to determine the type of investor you are.
The author (Benjamin Graham the intelligent investor) explains clearly the two key concepts in this book that help both newbies and advanced investors to stay away from the trap of not making a rational decision over investment. I do agree with the suggestion in this book that we should make a clear distinction between investment and speculation.
Investor: is the one who has critical skill and knowledge in the field of investment. Importantly, they always use those skills and expertise to do proper research before making a rational decision based on their knowledge and skill without any bias.
Speculator: normally describe people who do not have the proper knowledge and expertise in stock market investing. They quickly jump to the conclusion by just guessing, and often they make a huge mistake in terms of lack of preparation and knowledge.
Related reading: Best Books On Stock Market in 2022
2. The Concept of Value Investing and Intrinsic Value ( The Intelligent Investor)
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As mentioned before, the main concept of this book is all about value investing philosophy, where Benjamin Graham laid out the very first foundation concept in the book. In particular, a long-term investment strategy is always the best option to keep a hold of the stocks for a long period of time, and then you sell when the price is up for profit. Despite this, others are busy with their trading and taking big risks on their investment.
This is one of the most fascinating ideas to learn and adopt in making a smarter decision overstock selection. For this reason, I strongly agree with the point that constant trading makes you pay more for commissions and taxes.
While the idea of value investing is to remind everyone to stay patient and wait until they find the equity is unvalued, and then they can invest in it and stay in it in the long game. Graham argues that market volatility is just a part of investing, and investors should not panic to make a silly mistake during a market downturn.
In order to determine a good investment decision, investors need to take a comprehensive analysis of the equity such as company performance, financial performance in both revenue and net income, calculate the intrinsic value, check on future earning and management style. Throughout the history of the stock market, we all have witnessed the rise and fall of the stock market, but main important thing is to stay focus and stick with the plan you have in mind (Benjamin Graham the intelligent investor)
The intelligent investor by Benjamin Graham is one of the best investing books, where you will learn all about the key principles associated with value investing, the margin of safety, and long-term investment strategy. Those could be set as a foundation to reach your end goals.
Related reading: Peter Lynch Book Review 2021:One Up on Wall Street
3. The Warren Buffett Way
Benjamin Graham is a founding father of the “ Value Investing” principle, and he was a mentor and a professor of Warren Buffett, the most successful investor on the planet. Throughout the time Warren Buffett learned from his mentor and read the book, these things directly shaped his investing principle and ideology, which earned him one of the richest people on earth and the title” a legendary investor” and ” Oracle of Omaha“.
Warren Buffett started to read the first edition of the book ” The Intelligent Investor” when he was 19 years old. Over time, the principles in this book have placed a huge impact on his investing style, which he and his longtime partner Charlie Munger have built a successful conglomerate empire, The Berkshire Hathaway Inc.
Until recently, Sir Warren Buffett still thinks ” The Intelligent Investor, is the best investing book of all time. It’s because it shapes his investing principle and philosophy. Throughout Berkshire Hathaway’s annual meeting over the years, Warren Buffett always mentions the concepts and important chapters in this book to the shareholders, and always uses principles in the book to answer or give advice to others.
Value investing strategy is still applicable in modern investing as you can see Warren Buffett has successfully implemented this type of investing principle throughout his investing career. He has made billions of dollars by adopting this strategy- buys low and sells high based on acquiring shares from the quality business. Therefore, if you are currently searching for stock market investing books to read, the “ Intelligent Investor” is a must-read one because the book highlights all the fundamental principles associated with the value investing strategy (Benjamin Graham the intelligent investor)
4. The Margin of Safety- A-Main Focal Point on The Intelligent Investor
The margin of safety is another most critical principle that helps you to increase the chance to select the right stock investment for creating long-term success. In particular, the author challenges all types of investors to conduct proper research about a particular stock including assets quality, performance, future earning, management style, P/E, and industry performance, which allow you to identify the “Intrinsic value” of the stock (Benjamin Graham the intelligent investor).
By conducting the margin of safety of security, it might help to increase the chance to determine the stock whether is overvalued or undervalued. For this reason, the investor can take the analysis based on the margin of safety, and make their own decision for selecting the appropriate security.
The margin of safety is the main reason to distinguish between investor and speculator. It’s because the true investor will try to execute knowledge in the investing by calculating every key aspect of the margin of safety, which might help them to increase the chance of success in the market.
Overall, ” The intelligent investor” by Benjamin Graham is a must-read for all types of investors. By applying all critical principles from the book, the investor would be able to highlight the true intrinsic value of the stock and can make their own decision based on their analysis.
By Jiro Nguyen, Founder of Jns-millennial.com
The content is based on the personal opinion of the author. It is accurate and true based on the best knowledge of the author and his research. The article should not use as comprehensive or a substitute for professional advice.
What is the main concept of The Intelligent Investor by Benjamin Graham?
The Margin of Safety is the main focal point of The Intelligent Investor, which reflects the value investing style.
What are best stock market books?
The Intelligent Investor by Benjamin Graham is one of the best investing books of all time.
What is value investing?
The concept behind The Intelligent Investor by Benjamin Graham, where you spot the assets, which are undervalue.
What is the main investment principle behind Warren Buffett success?
Warren Buffett investment philosophy is influenced by the book, The Intelligent Investor.