One sentence summary
The Intelligent Investor Rev Ed. by Benjamin Graham is a definitive book on value investing, which demonstrates the principles of investing that went on to shape the modern field of investing.
Book genre
Nonfiction, Investing, Business & Finance.
Main topic of the book
The Intelligent Investor Rev Ed. by Benjamin Graham is a classic book of value investing, discussing the methods, strategies, and principles of investing necessary to build a successful portfolio.
Key ideas
- Diversification: The Intelligent Investor Rev Ed. emphasizes the importance of diversifying investments in order to reduce risk.
- Creating a margin of safety: Proposing the concept of a “margin of safety” – the idea that investors should guard themselves against potential losses by investing in stocks which are undervalued from their intrinsic value.
- Controlled risk-taking: The Intelligent Investor Rev Ed. emphasizes the importance of taking risks in order to maximize returns, but within a controlled and realistic environment.
Main parts of the book and a short summary
The Intelligent Investor Rev Ed. consists of four main parts: Part I explains the core concepts of value investing; Part II provides detailed advice on selecting stocks; Part III focuses on the legal and societal aspects of investing; and Part IV focuses on special situations and critique of value investing. The book also contains a glossary of financial terminology.
Part I explores the basic principles of value investing. Benjamin Graham outlines the objectives of a typical investor and advocates diversification as a crucial element of any portfolio. He also explains the concept of a “margin of safety” – the idea that investors should guard themselves against potential losses by investing in stocks which are undervalued from their intrinsic value. Graham also explains the principles of “Mr. Market” and “Mr. Money,” two imaginary “lunatics” who represent the alternating trends of the stock market.
Part II offers guidance on the selection of individual stocks. The author addresses the characteristics of a suitable company and provides tips on how to spot a good investment. The advice is generally focused on conservative investments with low risk and a good long-term potential.
Part III focuses on the legal and societal aspects of investing. Graham discusses the fiduciary responsibility of directors to shareholders, the responsibilities of governments and the legal and tax aspects of corporate investment.
Part IV looks at special situations and gives a critique of value investing. Graham argues that too many investors rely solely on the stock market and should instead diversify their investments. He also questions the widespread belief that the stock market is always the best place to look for investment opportunities.
Key takeaways
- Diversification is key to reducing risk.
- Create a “margin of safety” by investing in stocks which are undervalued from their intrinsic value.
- Take calculated risks in order to maximize returns.
- Understand the characteristics of a suitable company and how to spot a good investment.
- Be aware of the fiduciary responsibility of companies and governments in the stock markets.
- Diversify investments beyond just the stock market.
Author’s background and qualifications
Benjamin Graham is considered the father of value investing. A Columbia Business School professor and influential investor, Graham wrote several influential investing books, including The Intelligent Investor. He has been described as the “starting point for all serious investor education.”
Target audience
The Intelligent Investor Rev Ed. is intended for those with an interest in value investing, but is most suited to long-term investors as it offers a practical guide to investing.
Publisher and first publication date
The Intelligent Investor Rev Ed. was first published in 2003, by HarperBusiness.