Questions About The Intelligent Investor

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Answered Questions (7)

What kind of background is required to actually understand this book. I tried reading it once but couldn't understand much. Can anyone tell me the books, I should read first in order to go through The Intelligent Investor. Thanks!

Kevin Chidiac Personally i didn't read any books prior to reading this one. I just went over to www.investopedia.com, read all the basics about stocks, bonds, commo…morePersonally i didn't read any books prior to reading this one. I just went over to www.investopedia.com, read all the basics about stocks, bonds, commodities, trading floors(NYSE and NASDAQ chiefly), options, derivatives, etc... and in each page whenever some word was new to me i would lookup its definition and then resume reading. I've only taken one class of economics my entire life, so when i first started reading this book i couldn't understand a thing. But now i have the basic knowledge to understand - at least partially - what the author is talking about. Hope this helps :) (less)

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Warren Buffett says is the best book on investing that he has ever read.

Mazen El Senih Thanks for mentioning that, Warren Buffett's opinion is a highly ranking in considerations.…moreThanks for mentioning that, Warren Buffett's opinion is a highly ranking in considerations.(less)

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How to get the most out of the book ?

Nando I'd like to start of by saying that I think this is one of the most clear-cut and practical guides for investing and personal finance, something almos…moreI'd like to start of by saying that I think this is one of the most clear-cut and practical guides for investing and personal finance, something almost all of us have to deal with at some point.

-Honestly, I think that a bit of prior knowledge on finance and investments is useful before starting. The book should be clear also without any prior knowledge and definitely don't let it scare you off, but just know you probably have to look some stuff while reading in the beginning.
-The book is perhaps not real "bed time reading"; view it more as a practical guide.
-Underline and make notes on the topics associated to your investments/topics of interest.
-I read the book cover to cover (currently in the final chapter), but I would not per se recommend this; if you're not planning to invest in futures or derivatives, you can skip/skim over these chapters. I would advice to especially read chapter 8 and 20, like Warren Buffet advices :)
-In the revised edition (which you're probably reading if you bought the book in the last decade) each of the original chapters (written by Graham) is accompanied by a present-day review by Jason Zweig. These are very useful, as he cuts to the point and adds some present day examples. Don't skip these.
Hope it helps!

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for a guy whose never read a book about invesing and has no idea how stocks work etc, will this be a good starting point? and will it be easy for me to understand it ?

Saurabh Patel Obviously whithout any doubt. Even you are not from finance or economic background you can get the concepts. It is more behavioural than techniques. P…moreObviously whithout any doubt. Even you are not from finance or economic background you can get the concepts. It is more behavioural than techniques. Parallaly keep serching for current market situation of your stock markets. After completion of book you will definately get confidence and your own method of investment.(less)

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What is the best way to read this book? I am already half way, the book and especially the commentary is neat. However, i just keep underlining the important points, any suggestions on what practices to do that will make effective and efficient reading?

Shahid Raja Few of his pieces of advice which you can use as a checklist are as follows

·Your main goal should be to not lose money; so go for ‘investing’ and avo…moreFew of his pieces of advice which you can use as a checklist are as follows

·Your main goal should be to not lose money; so go for ‘investing’ and avoid ‘speculating,'. Buy some good stocks and stick with them instead of day trading.
·Buy the stock whose Price/Earnings Ratio (often shortened to the P/E ratio or the PER is the ratio of a company's stock price to the company's earnings per share.) should be less than 15.
· Don't invest in companies that have had negative earnings-per-share in the last three years.
· Similarly its Price/Book Value Ratio (or P/B ratio, is a financial ratio used to compare a company's current market price to its book value. This ratio also gives some idea of whether an investor is paying too much for what would be left if the company went bankrupt immediately) should be less than or equal to 22.5.
· Don't buy a share simply because its share is selling cheap; look for its EPS growth (annual rate of growth of earnings from investments). Ideally it should be more than 30% (cumulative) over the course of the prior 10 years. This is a good indicator of a stable and sound business model.
· Look for a current ratio (current assets / current liabilities) greater than 2. It is a signal that the company is financially secure.Always prefer companies with dividends, and with consistent dividend growth.
· Market crashes should be thought of as exciting and delightful fire sales on the best stocks. By contrast, be terrified when the market has gone up far, fast, and resist the urge to start buying more stock when the market is up. (He does not advocate investing or divesting simply because the market goes down or up, one always looks at individual companies.)

A lot of financial jargon? Yes, but this is essential if you want to enter in this field. And you will get used to these terms within few days
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