By: Benjamin Graham31-MINUTE AUDIO / 4,156 WORDS (8 PAGES)
SYNOPSISThis book will not teach you how to beat the market. However, it will teach you how to reduce risk, protect your capital from loss and reliably generate sustainable returns over the long run. Warren Buffett calls the Intelligent Investor "by far the best book on investing ever written."
Benjamin's proven value investing approach replaces risky attempts to project future share prices with sound investments based on the underlying value of the company's tangible assets.
The Intelligent Investor by Benjamin Graham gives you everything you need to equip yourself with the investor's mindset necessary to avoid the panic of market fluctuations that plague the ordinary investor. Don’t be ordinary. Be intelligent.
TOP 20 INSIGHTSThere are two kinds of investors. Defensive investors aim to protect their capital from losses, generate decent returns and minimize frequent decisions. Enterprising investors devote most of their time to manage their portfolios actively. An enterprising investor does not take more risks than a defensive investor but invests more in stock selection.
Part-time investors should stick to defensive investment strategies. Defensive investors can achieve a decent result with minimum effort and capability. However, even a marginal improvement from this result is challenging and requires extraordinary knowledge and skill. An attempt to outsmart the market by spending a little extra time and effort will primarily result in below-average gains.
Confusing speculation with investment can be a costly mistake. Speculators buy hot stocks based on future growth prospects. In contrast, investment is made on a thorough analysis of the underlying business to ensure the safety of principal and adequate — but not extraordinary — gain. Invest in a stock only when you can comfortably own it without following its daily share price.
If you cannot resist the urge to bet on the next big growth stock, set strict limits on speculation. Keep a separate speculative account with less than 10% of your capital for speculative activities. Never mix money from the investment account and speculation account.
It's a risky idea to speculate on high-growth industries, and high-growth stocks are a risky idea. The growth prospects for a business do not necessarily result in profits for investors. Because these stocks are often overpriced, growth may not result in proportional returns. Only eight of the largest 150 companies on the Fortune 500 list managed to grow earnings by at least 15% over two decades.
Graham strongly urges investors to stay away from Initial Public Offerings. IPOs often happen in bull markets and lead to inflated valuations. When the bear market begi