The Intelligent Investor

Submitted by Book Library on 6 March, 2010 - 17:42

Among the library of investment books promising no-fail strategies for riches, Benjamin Graham's classic, The Intelligent Investor, offers no guarantees or gimmicks but overflows with the wisdom at the core of all good portfolio management. The hallmark of Graham's philosophy is not profit maximization but loss minimization. In this respect, The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) (Paperback) is a book for true investors, not speculators or day traders. He provides, "in a form suitable for the laymen, guidance in adoption and execution of an investment policy". This policy is inherently for the longer term and requires a commitment of effort. Where the speculator follows market trends, the investor uses discipline, research, and his analytical ability to make unpopular but sound investments in bargains relative to current asset value. Graham coaches the investor to develop a rational plan for buying stocks and bonds, and he argues that this plan must be a bulwark against emotional behavior that will always be tempting during abrupt bull and bear markets.

Since it was first published in 1949, Graham's investment guide has sold over a million copies and has been praised by such luminaries as Warren E. Buffet as "the best book on investing ever written." These accolades are well deserved. In its new form with commentary on each chapter and extensive footnotes prepared by senior Money editor, Jason Zweig the classic is now updated in light of changes in investment vehicles and market activities since 1972. What remains is a better book. Graham's sage advice, analytical guides, and cautionary tales are still valid for the contemporary investor, and Zweig's commentaries demonstrate the relevance of Graham's principles in light of 1990s and early twenty-first century market trends.

Positive Review of The Intelligent Investor

When I first came across the first edition of this book in my local library in 1959, I was a teenager. Back in those days there were only a handful of books about the stock market. And I've read all of them during my junior high and high school years. This latest updated 623-page paperback (the index alone is 33 pages) version updated by Jason Zweig is a welcome addition to this classic. The original chapters are intact, but with footnoted comments by Zweig. Moreover, he provides his own commentary on each chapter contents in a separate chapter following each original chapter. He provides extensive research, charts, tables and commentary that updates the book to the present years. He is not afraid to take on the big guns of Wall Street and show how wrong they were in some of their extremely bullish predictions during January-March 2000, when the market was at its peak. The first nine chapters cover investing basics that all investors could benefit from.

There are many truisms spouted on Wall Street that are not really true. These chapters of The Intelligent Investor provide the investor with a realistic picture of how Wall Street works and what investors need to do to come out ahead. Chapters 10-20 focus strictly on fundamental analysis, stock selection, convertible issues and warrants, and other subjects. Investors who plan to invest directly in stocks should make sure to read these chapters. However, for readers more interested in investing in mutual funds, and in particular index funds, they need not concern themselves with all the detail in these chapters unless they have the time or interest in the subject matter presented. In conclusion, the combination of pioneer Ben Graham?s original work coupled with Zweig?s meticulous and enjoyable update, make this a remarkable book about investments and investor behavior that every new and experienced investor should read. Of the 500 investing books that I’ve read, this one certainly is one of the greats of all time.

Negative Review of The Intelligent Investor

If you want to read Graham, read the 4th revised edition (1997, 368 pages) in which Graham has expressed his idea very clearly. To me, this edition (2003, 640 pages, with Jason Zweig) adds no value upon the previous one but noise. And, I suggest you read the review titled "Classic book, but annoying commentaries" of June 30, 2004.

Author Biography

Benjamin Graham is widely acknowledged as the father of modern security analysis. He grew up in New York City and graduated from Columbia University. When he graduated, he was offered teaching positions in English, mathematics and philosophy. But as fate would have it, he started his career on Wall Street working for Newburger, Henderson and Loeb as a runner delivering cheques and securities. His talent was soon recognized and within a few months he was writing one of its daily market letters. Mr. Graham soon became one of Wall Street’s most successful investors and later co-founded Graham-Newman, investment advisors.

Graham's reputation as the father of value investing can be dated from 1928 when he started teaching Advanced Security Analysis at his old college. He had been thinking of writing a book, and he reasoned that the best way to accomplish his goal was to prepare and teach the material in a classroom setting. The notes from the course were transcribed by David Dodd and formed the basis of the investment classic Security Analysis which was published in 1934. His timeless Security Analysis and The Intelligent Investor are still considered the “bibles” for both individual investors and Wall Street professionals.

Table of Contents

  • Investment versus Speculation: Results to Be
    Expected by the Intelligent Investor 1
  • The Investor and Inflation 16
  • A Century of Stock-Market History: The Level
    of Stock Prices in Early 1972 26
  • General Portfolio Policy: The Defensive
    Investor 40
  • The Defensive Investor and Common
    Stocks 53
  • Portfolio Policy for the Enterprising Investor:
    Negative Approach 63
  • Portfolio Policy for the Enterprising Investor:
    The Positive Side 73
  • The Investor and Market Fluctuations 94
  • Investing in Investment Funds 116
  • The Investor and His Advisers 131
  • Security Analysis for the Lay Investor:
    General Approach 145
  • Things to Consider About Per-Share
    Earnings 165
  • A Comparison of Four Listed Companies 175
  • Stock Selection for the Defensive
    Investor 183
  • Stock Selection for the Enterprising
    Investor 201
  • Convertible Issues and Warrants 220
  • Four Extremely Instructive Case Histories 233
  • A Comparison of Eight Pairs of Companies 246
  • Stockholders and Managements: Dividend
    Policy 269
  • "Margin of Safety" as the Central Concept
    of Investment 277

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