The Intelligent Investor Review
The Intelligent Investor is a popular value investing book read by many Singaporeans and value investors around the world. This book is authored by Benjamin Graham. It is also being described by Warren Buffett the best book about investing ever written. It has totally changed my mindset that stock trading is actually a speculative game. After a decade of stock investing, I realised that the most intelligent investing way is to invest in a profitable business consistently over a longer period of time. This book has certainly inspired me a lot.
Highlights of The Intelligent Investor
The Intelligent Investor highlights the importance on fundamental valuation and not to fall into common investors’ mistakes of letting our own emotions to run over our investment decisions. Benjamin Grahim had wrote this book easier for novice investors to understand that they need to make investment decisions like running their own businesses and not trying to beat Mr. Market. Graham outlines value investing principles that are still valid as of today.
Benjamin Graham outlines five basic value investing principles as follows :
- Understand and study the business well. Invest only if your business confidence is high.
- Know the management of the business
- Do not trade for quick profits. Invest consistently for profits over time.
- Do not follow the crowd to chase for stocks. Buy a business when you can see there is a value.
- Give yourself room for mistakes with a margin of safety
All the above principles will lead to the decisions of buying a stock only when you know its business and the management well. Invest only when you have high business confidence that the business is substainable and at the same time being defensible against its competitors from the same industry.
Intelligent investors look to dividends and business growth as the source of their gains. This growth may or may not result in higher stock prices over time. Fundamental analysis is vital to understand the value of the business in a systematic way. To me, fundamental analysis will be the primary and technical analysis can be a good compliment to confirm the entry and exit point of investing.
Once you have invested a stock with confidence, stick to your plan. Graham emphasizes the virtues of a simple portfolio of value companies over time and profit is not made by buying and selling or timing the market, but by owning and holding securities and receiving dividends that grow in value over time.
The Intelligent Investor spells out the difference between a speculative way of investing and an intelligent way of investing. Treat value investing like running a business and informed decision is made upon doing the fundamental analysis. This book is quite thick and it may be daunting at times over some of the accounting terms used. I managed to finish reading it after many slow weeks of reading. If you are serious in value investing, we would recommend you is to read this book first. Click here to buy and own a copy of this book for your leisure reading.
But if you are too lazy or want to save some reading time, sign up our 3 hours free value investing seminar package (worth S$349). You will walk out from the seminar venue with some good understanding of value investing.