The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham, Jason Zweig
|
List Price: Our Price: $10.92 You Save: $9.03 (45%) Availability: Usually ships in 1-2 business days Buy Used: from $9.84 (click here) Category: Book See more book details and other editions |
|---|
Book Reviews of The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)
Book Review: Look in the Mirror First!
Summary: 5 Stars
Since I am retired and trying to manage my own portfolio, I figured this would be the book to read. I know how to pick 4 or 5 star funds and diversify well enough, but I don't have enough theory or any formal financial background at all. I was looking for a classic book on the subject, one that a financial novice could understand, and decided to read this one.
Benjamin Graham is known as the Father of Value Investing and was the mentor of Warren Buffett, the most successful investor of all time. Warren Buffett called the Intelligent Investor `the best book about investing ever written.' He believed in defensive, value investing, and famously summarized his philosphy as follows: "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."
I found that `value investing' means that you buy only something that is being sold below its actual value, like buying dollar bills for 40 cents each, he said. One should take the quantitative (statistical) instead of the qualitative (predictive) approach, since no one can forecast the future anyway. Look at what a security is really worth in a business-like way, just like you would do for any purchase, ignoring what others might think. Do your homework is what he is saying!
According to Graham, almost everybody, me included, does investing wrong. You are supposed to buy low and sell high, but most folks buy when the price is going up and sell when it is coming down. `Mr. Market' is very emotional and encourages stampedes toward whatever looks good at the moment, and away from investments that seem spent. This very act of buying and selling creates updrafts and downdrafts in the market which causes disparity between what the price is and what the price should be for a given investment. Eventually the true value of an investment comes to fore when things settle down. The maxim he uses for this is: the market is a voting machine in the short run and a weighing machine in the long run. The investors `vote' for an investment which drives the price up; later, the investors find out what the investment is really worth, and the price settles into it's real value. He cited convincing examples in the tech-bubble era of the late 90's where stock prices ascended to ridiculously high levels and then came crashing down to almost nothing, and their stock shares became like Confederate money, worth only slightly more than the paper they were printed on.
In general, his theory runs counter to the speculative, get-richer-quick investing that seems standard for most of us. Stay away from gimmicks like market-timing and formula investing (chasing after perceived patterns in the market). Be boring, he says, and go for something steady and sure. Don't try to beat the market; just try to keep up with it. If you don't want to do the necessary homework, buy index funds. He touts ignored `secondary' or `unsexy' companies, the ones that don't have big names, or ones that produce boring products. It was interesting that when Graham was asked why he was unafraid of losing his edge by proclaiming value investing, he joked that his books are' the most over-read and under-used books on finances ever written'. If, indeed, everyone did value investing, there would be no bargains left out there. We are talking about something that works, but that no one wants to use!
A cornerstone of the defensive investing philosophy involves building in a good margin of safety by buying investments at as far below actual worth as possible. He also talks a lot about managing risk by patience and self-control; he says: `Don't just do something, stand there!' In some sense, this book is more about the person making the investments than the investments themselves. In essence, if you want to know what risk is, look in the mirror! In other words, it's not about how much risk you can tolerate; it is about how much investigation you are willing to do. He mentioned Pascal's Wager as a graphic example of how to think of the consequences when taking on risk - - - if one wagers as to whether God exists or not, he is better off betting He does; otherwise, though the rewards could be a little better, the consequences could be eternally worse! (This was, to me, a fairly heavy-handed but instructive parallel.)
Watch out for the shenanigans of the accountants when you read the financial reports. Words and phrases like pro-forma, nonrecurring charges, special charges, and good will could be euphemisms for a smoke screen. I also learned the phrase `kitchen sink accounting', which puts all possible losses into one year, which distorts the picture but gives good tax results for the company. The lesson is to not ignore the footnotes and to read the statements to the end.
Consistent with his philosophy, Graham does not believe in the prevalent Efficient Market Theory (or EMH), which says that investments have the correct prices because there is so much, widespread information readily available on every investment. He basically believes, and gives many good examples, that the public is not interested in digging into the nuts-and-bolts financial information, but is only interested in what is popular. In a word, an investor needs to make sure he understands what he is investing in, and make business decisions instead of emotional decisions about it. He says that the finances are really not very complicated, and it's more about character than brain.
The first edition of this book, written in 1950 and was revised several times before Graham died in 1976. Since it was a little dated as far as market history is concerned, Jason Zweig wrote commentaries on each chapter to bring it into the 21st century. Graham, as a product of his day, talked mostly about stocks and bonds, and less about funds, and he over-emphasized, in my opinion, the importance of dividends. Zweig says that diversity has replaced value today. Also, dividends are no big deal today for most investors since the total return (NAV + dividends) is what really matters. Another thing is that Graham lived through the Depression and saw that it took 25 years (to 1954) for the market to reach the levels of pre-Crash 1929; this might have made him defensive.
I'm glad I read the book. It gave me perspective on how the market works, though I'll still stick with diversity over value, especially since I invest almost entirely in funds. He did not have to scare me off on individual stocks, but he did convince me to do more homework and to try to be more business-like in my financial decisions, and - - - to look in the mirror first.
Book Review: Cetin SALMAN's review on Intelligent Investor by Benjamin Graham
Summary: 5 Stars
This is the best investment guide I have ever read, I suggest for anyone who is interested in real investing business.
With my best wishes.
?etin SALMAN
Book Review: Great detail of the history and different forms of investment, but kind of boring
Summary: 4 Stars
I found the reading of this edition of the book to be very boring. I have not read any of the previous editions of the book, but I did find the book to be informative. I knew much of what was presented already, but it is a solid introductory book for readers wanting to discover the history of the stock market and different forms of investment. Throughout the book Graham preaches about which styles of investing to take which have he believes have shown to be successful, but I believe it us up to the reader(and Graham says the same) to identify what kind of investing style you will use and find what forms of investments you wish to use.
This book may bore a young avid reader looking to find out more about investing, but it may help make you a more intelligent investor. A solid book if you don't know a lot of the ways to invest your money and advises on many ways that people invest their money that are too risky or a waste of time(such as annuities, IMO) but it also lacks information on many newer forms of investing that are being used today.
Book Review: Good book for serious investors.
Summary: 4 Stars
This book is very good if you are into value investing.Book Review: Great book on personal investment
Summary: 4 Stars
This is a great guide to developing one's personal investment portfolio. It dispells the myths and claims by those pundits that declare they have discovered ways to beat the market. It makes clear distinctions between speculation and investment, and puts forward sound principles for investments.
It would be easier for those who have basic but proper training in stock valuations to understand the text and where the authors are coming from. But laymans should also find it a very useful guide.