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1-Page Summary of The Intelligent Investor

Overview

The Intelligent Investor by Benjamin Graham is a detailed guide to investing. Investors should split their portfolio between bonds and stocks, depending on how much time they want to spend researching and managing the investments. The higher the risk of an investment, the less it should make up in terms of percentage of wealth invested.

Many people buy stocks when they’ve already risen above their peak price and sell them when they’ve fallen below their best prices. This makes it hard to make money, as transaction fees, taxes, and adviser fees cut into profits. To avoid buying a stock when it’s too expensive to offer a good long-term return on investment, investors should define the price-to-earnings ratio that works for them. In order to make as many purchases at optimal prices throughout the year as possible, investors should devote a set amount of money each month so that they can invest in more shares at lower prices than if they had invested all of their money at once.

Strategies for investment include finding well-managed funds, getting advice from a professional manager, reading corporate financial statements deeply and carefully, seeking stocks that pay consistent dividends and have valuable assets, limiting risk by setting prices low enough to guarantee results even if projections are overinflated. Investors should not fall for the hype or take recommendations without doing independent research.

Key Takeaways

Value investing is a defensive investment strategy that focuses on long-term investments in a balanced portfolio of stocks and bonds.

Investors can minimize their losses by using strategies like dollar-cost averaging, price-to-earnings ratios, and margins of safety. Speculators are more common in today’s stock market than investors. They tend to buy stocks when they’re overpriced and sell them when they’ve fallen from the ideal price. Investors who don’t have time or interest in managing their own portfolios should invest primarily in mutual funds or index funds. After thorough research, an investor may choose to have someone else manage his portfolio if no fund available offers what he wants for his portfolio.

Even aggressive investors should be cautious about investing in second-grade stocks, preferred stocks, foreign bonds, new issues, junk bonds and call options.

Past performance, industry growth predictions and projections should not be the only factors considered when making an investment. Companies that do not meet seven criteria for well-capitalized businesses with high performing stocks at low prices should be screened out of a portfolio. Stocks that are riskier may still make sense if they have appropriate prices.

Accountants have many ways of manipulating numbers to give an impression that a company is making more money than it really is. Investors should be careful about blindly trusting the numbers and instead look at the context behind them.

Stockholders are part owners of businesses with the ability to change management through their proxy votes. Companies sometimes try to talk them out of dividend payments, which is not in the investor’s best interests.

Key Takeaway 1: Value investing is a defensive investing strategy that concentrates on long term investments, a portfolio balanced between bonds and stocks, and low risk.

Value investing is a style of investment that focuses on long term investments with high probabilities of success. That means an investor should only manage their portfolio a few times per year and shouldn’t be distracted by daily stock prices. A value investor doesn’t constantly seek out new opportunities or buy shares in untested companies.