Maciej Nowicki's Reviews > The Intelligent Investor

Intelligent Investor by many is considered to be the best book on value investing that you will ever read. The book is written by Benjamin Graham who was Warren Buffett’s lecturer at Columbia University. Warren Buffett, one of the greatest investors of all time, personally endorses it and says that this is, by far, the best book on investing. He says that stock is an ownership interest in a company and is something completely opposite to speculation, day trading or anything like that.

At the beginning of the book, Graham outlines what he terms as investing as opposed to speculation. Basically, investing is where you aim to preserve the capital and you thoroughly research the shares so that, within a certain extent, guarantee what kind of earnings you’re going to get from that investment. In other words, invest only if you would feel comfortable to hold the stock in the future without seeing the fluctuating prices. That’s the essence of value investing.

Nevertheless, what Graham really highlights, apart from research and a plethora of ratios you should be able to evaluate, is how the psychology and logic of the investor really matter and how to keep your emotions under control. He goes through different types of investors, starting from the defensive investor who is someone a lot more careful. It could be even called the passive investor because he invests and then leaves the wallet allowing it to grow. Next, we have the entrepreneurial investor who is someone willing to and has time to do a lot more research to look for undervalued companies that he can put their money in and watch it grow over time. He also argues that most people should be the defensive investor because the entrepreneurial investor approach does require a lot of time. Too much time for someone who also has a full-time job at the same time as being an investor.

Next, he talks a lot about asset allocation. Generally speaking, it is about diversification of your investments where 75% of your portfolio you should be in stocks as the market is rising and 25% of it in bonds or other fixed-income assets. Of course, 75% to 25% is just approximation. As the market hits its peak (or what you think might be the peak) you should start to sell off your shares and start aiming at bonds which then should represent 75% of your wallet. When the recession hits rock bottom you should repeat the circle and go back to shares. Graham also gives his advice on further diversifications of companies in your wallet, their size and ratios they should present.

Intelligent Investor is a pretty old book and was written 1949 so you could expect some dry and a bit old-fashion language. Nevertheless, it was updated several times and I would recommend the latest version as each chapter was enhanced by comments provided by Jason Zweig. This adds a lot of value because he goes through what Graham is talking about and applies that to modern times and companies. On the other hand, as the book...(if you like to read my full review please visit my blog https://leadersarereaders.blog/the-in...)