The original 1949 Edition of "The Intelligent Investor," by Benjamin Graham and published by Collins Business (Harper Collins Publishers), is now over sixty years old. Graham is considered the "father of value investing."
Despite this short tome's age, I found myself chuckling while reading several passages: the book is timeless. Absolutely timeless. The wisdom and simplicy speaks to readers of any era. I firmly believe this book could remain relevent for investors in another sixty years henceforth.
Indeed, for any person endeavoring to understand the fundamentals and principles of value investing, this publication is highly recommended for their library.
When the first edition of this book was written in 1949, the events and history of the Great Crash colored a significant portion of the content. The 1929-33 market debacle was still a vivid reminder of the risks when investing in securities. The Dow Jones average had peaked in 1929. It would not regain the same level until 1954; five years after this book was published.
Let me summarize some broad themes found in the book:
- Benjamin Graham was an investor. His book caters to investors. By definition, he did not believe that "speculators," could make money day-in and day-out by trying to outwit and time the market. While uncommon in his time, I believe Mr. Graham would consider "speculators" and current "day traders" synonymous. His thesis: to be able to speculate successfully, one must be smarter than all the others trying to do the same thing.
- He clearly offers counsel to all investors; ensure a "margin of safety." Risk taken should be rewarded by comeasurate reward.
- The author speaks to two kinds of investors, "the Defensive" investor, and the "the Enterprising" investor. I liken the Defensive investor in today's world as a person who does not have the time or inclination to analyze securities. Graham encourages such a person to select a conservative bundle of large cap stocks and fixed income investments. While Index funds and ETFs were not available in his time, I believe that Graham would advocate their use for the Defensive investor. On the other hand, the author defines the Enterprising investor as a person with the propensity and ability to evaluate stocks with the intent to uncover undervalued issues. He believed that beating the market averages is possible for such investors.
- Graham espoused that hard work and arithmatic produced results. In the long run, careful analysis and investment strategy provides entirely acceptable returns to the investor.
For the more aggressive investor, he recognizes their tolerance for risk and offers practical advice. For such Enterprising investors, Graham cites "courage" of conviction as both admirable and necessary. He offers sound investment approaches and principles of individual security selection.
Graham writes in a comfortable, easy style. The exception is when the author opines on "Stockholders and Management" interaction. He openly admits his admonishment for both groups in this chapter. This section is spot-on for today. Little has changed in over a half century. A great read.
In summary, "The Intelligent Investor" is a foundation book for investors. Benjamin Graham's practical advice, wisdom, and simple eloquence makes this book a timeless reference of sound investment philosophy, fundamental security analysis, and overall clear-mindedness when trying to make sense of "Mr. Market."