Introduction

• Warren Buffett described Benjamin Graham’s seminal work, “The Intelligent Investor,” the ‘best book about investing ever written’

• First published in 1949 – it focused on three core investing principles:

• protecting your capital;
• pursuing adequate and sustainable gains; and
• overcoming self-defeating behaviors

• I’ve summarized Graham’s book as a 20-part series – capturing the most important lessons intended for the layperson – to help you make better investing decisions.

🗒️ From Warren Buffett…

“I read the first edition of this book early in 1950, when I was nineteen. I thought then that it was by far the best book about investing ever written. I still think it is.

To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information.

What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly prescribes the proper framework. You must supply the emotional discipline.

If you follow the behavioral and business principles that Graham advocates—and if you pay special attention to the invaluable advice in Chapters 8 and 20—you will not get a poor result from your investments (that represents more of an accomplishment than you might think)

Whether you achieve outstanding results will depend on the effort and intellect you apply to your investments, as well as on the amplitudes of stock-market folly that prevail during your investing career.

The sillier the market’s behavior, the greater the opportunity for the business-like investor. Follow Graham and you will profit from folly rather than participate in it.

To me, Ben Graham was far more than an author or a teacher. More than any other man except my father, he influenced my life”.

📚 Getting the Most from this Book

It’s rare for Buffett to give such high praise for a book. However, his preface adds gravity to the relative importance (and influence) of Graham’s work.

Graham first shared his investing thesis over 70 years ago – however the lessons are timeless – equally relevant to what we see today (perhaps even more so)

However, this is not a book I would recommend to those who are beginning their investing journey.

The book is very dense and requires focus and time.

Given this, my idea for this 20-part series was to capture what I felt were the most important facets that anyone could understand.

I also wanted to introduce all readers to the principles for sound (long-term) investing.

For example, for those who are less familiar with concepts such as reading a company balance sheet or understanding the true financial ‘health’ of an investment – the time spent reading these posts will be invaluable. What’s more, they are always there for you to come back to.

If I’ve been successful – you will be to:

1. Develop a clear framework for value based investing (e.g., focusing on intrinsic value over market fluctuations; investing with a ‘margin of safety’ for when things go wrong

2. Analyze companies through an understanding of financial statements (e.g., balance sheets, earnings ratios, debt ratios, liquidity and book value) – in turn helping you to avoid serious pitfalls; and third

3. Understand the importance of adopting long-term thinking, emotional discipline and eliminating self-defeating behaviors.

That said, if you’re serious about learning how to invest intelligently – this book is a must-read.

My posts do not do the book justice. They are only intended to be a summary of what I felt are the most important principles. And perhaps after reading my summaries (and examples) – you will feel more comfortable with tackling the book.

But let me clear…

This is not some get-rich-quick manual. Rather, it’s a guide to building your wealth steadily and safely over the long term – with the objective of both adequate and sustainable returns.

And as you work through each lesson – I recommend you do three things:

• Take your time: Don’t rush through it. Re-read if you need to (I’ve re-read the book three times). Absorb the concepts and work through the examples. And consider how they apply to your own investment goals.
• Supplement with other resources: Pair it with more recent books (here’s a great list of my favorite investing books); and/or recent articles to stay up-to-date on market developments; and
• Put the principles into practice: The real value comes from applying Graham’s teachings to your own investment decisions. Work through an example of a company you are thinking about investing in today – does it satisfy each of Graham’s criteria?

🏛️ The Goal: Building a Strong Foundation

My life (and investing) mentor – Charlie Munger – once said his advantage over others wasn’t necessarily being very intelligent – it was not being consistently stupid.

For me, this strikes at the very heart of ‘The Intelligent Investor’

As you work through the 20 chapters – he provides clear guidance on how to develop and implement a successful strategy (with a clear focus on avoiding costly mistakes).

It focuses primarily on establishing a foundational understanding of investment principles and cultivating a healthy investor mindset – rather than delving into complex security analysis techniques.

He draws from historical market patterns, highlighting that those who ignore past trends are doomed to repeat them.

As Mark Twain was alleged to have said “history may not repeat, but often it rhymes”

Something else Graham points out is the differentiation between investors and speculators (or “traders”)

He cautions against the allure of “get-rich-quick” schemes – where traders are regularly “in and out” of trades (hoping to time the market with precision).

Instead, he advocates patience and discipline in the pursuit of your long-term financial goals. 

And whilst market timing can be a viable strategy, he asserts that buying low and selling high, while sound in other business contexts, is unlikely to yield consistent success in the stock market.

Instead, it advocates for a more reasoned approach based on fundamental analysis and a long-term perspective.

🏗️ A Framework for Intelligent Investing

As you work your way through my posts (or the book itself) – you will find a strategy which works for you.

After all, there is no “one size fits all” with investing.

Much of this is a function of your own investing philosophy and risk tolerance. For example, what works for me may not work for you. 

However, there are some aspects of investing which hold true for all.

For example, he reminds us that emotions have no place in this game.

If you let your emotions overcome you (whether you’re an active investor or passive) – it will often lead to poor decision-making.

Greed may lead you to overpay for an asset. And on the other hand, if you’re too fearful, you might sell at the time you should be buying.

He encourages all investors to cultivate a temperament conducive to long-term investing, emphasizing that discipline and emotional control are crucial for success.

As part of removing emotion from decision making – he recommends a quantitative approach (vs one which is subjective or based on market sentiment)

For example, a consistent theme throughout the book is to always challenge the price you are paying in relation to the value they are receiving.

Regular readers of my blog over the past decade (or more) will often hear my reference to quality companies such as Apple.

There is hardly a better company on the planet in terms of its cash generation, product, market position and management.

However, this year (2024), the iPhone maker trades at a lofty 32x forward earnings (only growing its top line by low single digits).

Graham would challenge the investor as to whether that represents great value? Are you buying this at a true discount. 

Price is what you pay but value is what you get.

The book goes through many examples just like Apple – talking to such things as sales, earnings, debt and book ratios. And whilst some of the examples are from ~50 years ago – they are just as relevant today.

🎓 What This Book Will Give You

Graham’s book will help you develop a long-term investment strategy which centers on three pillars:

👉 #1. Minimizing the Risk of Irreversible Losses: By emphasizing margin of safety and avoiding speculative investments, Graham provides a framework for protecting capital and weathering market downturns

👉 #2. Maximizing the Chances of Achieving Sustainable Gains: Through a disciplined approach to valuation and a focus on long-term fundamentals, Graham guides investors toward identifying undervalued assets with the potential for sustained growth

👉 #3. Controlling Self-Defeating Behavior: Recognizing that emotions often lead to poor investment decisions, Graham stresses the importance of emotional discipline and independent thinking