The Intelligent Investor Rev Ed.

by Benjamin Graham

Overview

The classic bestseller by Benjamin Graham, perhaps the greatest investment advisor of the 20th century, The Intelligent Investor has taught and inspired hundreds of thousands of people worldwide. Since its original publication in 1949, Benjamin Graham's book has remained the most respected guide to investing, due to his timeless philosophy of "value investing," which helps protect investors against the areas of possible substantial error and teaches them to develop long-term strategies with which they will be comfortable down the road.

Over the years, market developments have borne out the wisdom of Benjamin Graham's basic policies. Here he takes account of both the defensive and the enterprising investor, outlining the principles of stock selection for each, and stressing the advantages of a simple portfolio policy. Among the book's special features are the use of numerous comparisons of pairs of common stocks to bring out their elements of strength and weakness and the construction of investment portfolios designed to meet specific requirements of quality and price attractiveness.

The Intelligent Investor may be the most important book you will ever read on making your investments a success.

"The Intelligent Investor is the best book ever written for the stockholder," says author and investment counselor John Train. Benjamin Graham's classic work offers sound and safe principles for investing-principles that have worked for more than forty years since the first edition was published. With an introduction and appendix by Warren Buffett, one of Graham's most famous students in investing strategy, this book takes account of both the defensive and theenterprising investor.

"By far the best book on investing ever written." — Warren E. Buffett

"There have been other good books written about money since 1841, but only a few hold up. The best known and most likely to make you money is The Intelligent Investor." — Andrew Tobias

"Graham ranks as this century's (and perhaps history's) most important thinker on applied portfolio investment." — John Train, author of The Money Masters

Author Biography: Benjamin Graham, the father of value investing, was perhaps the most influential investment figure of all time. His work laid the foundation of modern security analysis, and two of his books,The Intelligent Investor (1949) and Security Analysis(1934), are investment classics that remain bestsellers to this day. His Life and work have been inspiration for many of today's most successful investors, including Warren Buffett, Michael F. Price, and John Neff.

Product Details

ISBN-13:	9780062158628
Publisher:	HarperCollins Publishers India
Publication date:	06/13/2016
Pages:	640
Sales rank:	20,674
Product dimensions:	5.25(w) x 8.00(h) x 1.59(d)

About the Author

Benjamin Graham (1894-1976), the father of value investing, has been an inspiration for many of today's most successful businesspeople. He is also the author of Securities Analysis and The Interpretation of Financial Statements.

Read an Excerpt

CHAPTER ONE

Investment versus Speculation: Results to Be Expected by the Intelligent Investor

This chapter will outline the viewpoints that will be set forth in the remainder of the book. In particular we wish to develop at the outset our concept of appropriate portfolio policy for the individual, nonprofessional investor.

Investment versus Speculation

What do we mean by "investor"? Throughout this book the term will be used in contradistinction to "speculator." As far back as 1934, in our textbook Security Analysis,¹ we attempted a precise formulation of the difference between the two, as follows: "An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

While we have clung tenaciously to this definition over the ensuing 38 years, it is worthwhile noting the radical changes that have occurred in the use of the term "investor" during this period. After the great market decline of 1929-1932 all common stocks were widely regarded as speculative by nature. (A leading authority stated flatly that only bonds could be bought for investment.²)

Thus we had then to defend our definition against the charge that it gave too wide scope to the concept of investment.

Now our concern is of the opposite sort. We must prevent our readers from accepting the common jargon which applies the term "Investor" to anybody and everybody in the stock market. In our last edition we cited the following headline of a front-page article of our leading financial journal in June1962:

SMALL INVESTORS BEARISH, THEY ARE SELLING ODD-LOTS SHORT

In October 1970 the same journal had an editorial critical of what it called "reckless investors," who this time were rushing in on the buying side.

These quotations well illustrate the confusion that has been dominant for many years in the use of the words investment and speculation. Think of our suggested definition of investment given above, and compare it with the sale of a few shares of stock by an inexperienced member of the public, who does not even own what he is selling, and has some largely emotional conviction that he will be able to buy them back at a much lower price. (It is not irrelevant to point out that when the 1962 article appeared the market had already experienced a decline of major size, and was now getting ready for an even greater upswing. It was about as poor a time as possible for selling short.) In a more general sense, the later-used phrase "reckless investors" could be regarded as a laughable contradiction in terms-something like "spendthrift misers" — were this misuse of language not so mischievous.

The newspaper employed the word "investor" in these instances because, in the easy language of Wall Street, everyone who buys or sells a security has become an investor, regardless of what he buys, or for what purpose, or at what price, or whether for cash or on margin. Compare this with the attitude of the public toward common stocks in 1948, when over 90% of those queried expressed themselves as opposed to the purchase of common stocks.³ About half gave as their reason "not safe, a gamble," and about half, the reason "not familiar with." It is indeed ironical (though not surprising) that common-stock purchases of all kinds were quite generally regarded as highly speculative or risky at a time when they were selling on a most attractive basis, and due soon to begin their greatest advance in history; conversely the very fact they had advanced to what were undoubtedly dangerous levels as judged by past experience later transformed them into "investments," and the entire stock-buying public into "investors."

The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is a cause for concern. We have often said that Wall Street as an institution would be well advised to reinstate this distinction and to emphasize it in all its dealings with the public. Otherwise the stock exchanges may some day be blamed for heavy speculative losses, which those who suffered them had not been properly warned against. Ironically, once more, much of the recent financial embarrassment of some stock-exchange firms seems to have come from the inclusion of speculative common stocks in their own capital funds. We trust that the reader of this book will gain a reasonably clear idea of the risks that are inherent in common-stock commitments-risks which are inseparable from the opportunities of profit that they offer, and both of which must be allowed for in the investor's calculations.

What we have just said indicates that there may no longer be such a thing as a simon-pure investment policy comprising representative common stocks-in the sense that one can always wait to buy them at a price that involves no risk of a market or "quotational" loss large enough to be disquieting. In most periods the investor must recognize the existence of a speculative factor in his commonstock holdings. It is his task to keep this component within minor limits, and to be prepared financially and psychologically for adverse results that may be of short or long duration.

Two paragraphs should be added about stock speculation per se, as distinguished from the speculative component now inherent in most representative common stocks. Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook. More than that, some speculation is necessary and unavoidable, for in many common-stock situations there are substantial possibilities of both profit and loss, and the risks therein must be assumed by someone. There is intelligent speculation as there is intelligent investing.But there are many ways in which speculation may be unintelligent...

1. Benjamin Graham, David L. Dodd, Sidney Cottle, and Charles Tatham, McGraw-Hill, 4th. ed., 1962.

2. This is quoted from Investment and Speculation, by Lawrence Chamberlain, published in 1931.

3. In a survey made by the Federal Reserve Board.

Editorial Reviews

By far the best book on investing ever written.

Warren Buffett

The wider Mr. Graham’s gospel spreads, the more fairly the market will deal with its public.

Barron's

If you read just one book on investing during your lifetime, make it this one

Fortune

The wider Mr. Graham’s gospel spreads, the more fairly the market will deal with its public.” %COMM_CONTRIB%Barron's

The wider Mr. Graham’s gospel spreads, the more fairly the market will deal with its public.

Barron's