''The Intelligent Investor'' by

Benjamin Graham Benjamin Graham (; Given name, né Grossbaum; May 9, 1894 – September 21, 1976) was a British-born American financial analyst, economist, accountant, investor and professor. He is widely known as the "father of value investing", and wrote two ...

, first published in 1949, is a widely acclaimed book on value investing. The book provides strategies on how to successfully use value investing in the stock market. Historically, the book has been one of the most popular books on investing and Graham's legacy remains.

Background and history

''The Intelligent Investor'' is based on value investing, an investment approach Graham began teaching at

Columbia Business School Columbia Business School (CBS) is the business school of Columbia University, a Private university, private research university in New York City. Established in 1916, Columbia Business School is one of six Ivy League business schools and one of ...

in 1928 and subsequently refined with

David Dodd David LeFevre Dodd (August 23, 1895 – September 18, 1988) was an American educator, financial analyst, author, economist, and investor. In his student years, Dodd was a ''protégé'' and colleague of Benjamin Graham at Columbia Business School ...

. This sentiment was echoed by other Graham disciples such as

Irving Kahn Irving Kahn (December 19, 1905 – February 24, 2015) was an American investor and philanthropist. He was the oldest living active investor.''Financial Times'':On Wall Street: Age Old Wisdom He was an early disciple of Benjamin Graham, who popu ...

and

Walter Schloss Walter Jerome Schloss (August 28, 1916 – February 19, 2012) was an American investor, fund manager, and philanthropist. He was a well-regarded value investor as well as a notable disciple of the Benjamin Graham school of investing. He di ...

Warren Buffett Warren Edward Buffett ( ; born August 30, 1930) is an American investor and philanthropist who currently serves as the chairman and CEO of the conglomerate holding company Berkshire Hathaway. As a result of his investment success, Buffett is ...

read the book at age 20 and began using the value investing taught by Graham to build his own investment portfolio. ''The Intelligent Investor'' also marks a significant deviation in stock selection from Graham's earlier works, such as ''

Security Analysis In finance, Security analysis is the evaluation and assessment of stocks or securities to determine their investment potential. It involves analyzing various factors, such as financial statements, industry trends, market conditions, and company ...

''. Which is, instead of extensive analysis on an individual company, just apply simple earning criteria and buy a group of companies. He explained the change as:

Analysis

Value investing

Graham’s main investment approach outlined in ''The Intelligent Investor'' is that of value investing. Value investing is an investment strategy that targets undervalued stocks of companies that have the capabilities as businesses to perform well in the long run. Value investing is not concerned with short term trends in the market or daily movements of stocks. This is because value investing strategies believe the market overreacts to price changes in the short term, without taking into account a company’s fundamentals for long-term growth. In its most basic terms, value investing is based on the premise that if you know the true value of a stock, then you can save lots of money if you can buy that stock on sale.

Mr. Market

One of Graham's important

allegories As a literary device or artistic form, an allegory is a narrative or visual representation in which a character, place, or event can be interpreted to represent a meaning with moral or political significance. Authors have used allegory throughou ...

is that of Mr. Market, meant to personify the irrationality and group-think of the stock market. Mr. Market is an obliging fellow who turns up every day at the

shareholder A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...

's door offering to buy or sell his shares at a different price. Often, the price quoted by Mr. Market seems plausible, but sometimes it is ridiculous. The investor is free to either agree with his quoted price and trade with him, or ignore him completely. Mr. Market doesn't mind this, and will be back the following day to quote another price. The point of this anecdote is that the investor should not regard the whims of Mr. Market as a determining factor in the value of the shares the investor owns. He should profit from market folly rather than participate in it. A common fallacy in the market is that investors are reasonable and homogenous, but Mr. Market serves to show that this is not the case. The investor is advised to concentrate on the real life performance of his companies and receiving dividends, rather than be too concerned with Mr. Market's often irrational behavior.

Determining value

In ''The Intelligent Investor'', Graham explains the importance of determining value when investing. In order to invest for value successfully and avoid participating in short-term market booms and busts, determining the value of companies is essential. To determine value, investors use fundamental analysis. Mathematically, by multiplying forecasted earnings over a certain number of years times a capitalization factor of a company, value can be determined and then compared to the actual price of a stock. There are five factors that are included in determining the capitalization factor, which are long-term growth prospects, quality of management, financial strength and capital structure, dividend record, and current dividend rate. To understand these factors, value investors look at a company's financials, such as annual reports, cash flow statements and EBITDA, and company executives’s forecasts and performance. This information is all available online as it is required for each public company by the SEC.

Reception

Benjamin Graham is regarded as the father of value investing and ''The Intelligent Investor'' was highly regarded by the public and remains so. Ronald Moy, professor of economics and finance at St. John’s University, explains that “The influence of Graham's methodology is indisputable. His disciples represent a virtual who's who of value investors, including Warren Buffett, Bill Ruane, and Walter Schloss”. Warren Buffett is regarded as a brilliant investor and Graham’s best-known disciple. According to Buffett, ''The Intelligent Investor'' is “By far the best book on investing ever written.” Ken Faulkberry, founder of Arbor Investment Planner, claims, “If you could only buy one investment book in your lifetime, this would probably be the one”. Many of Graham’s investment strategies explained in the book remain useful today despite massive growth and change in the economy. Scholar Kenneth D. Roose of Oberlin College writes, “Graham’s book continues to provide one of the clearest, most readable, and wisest discussions of the problems of the average investor”. The Intelligent Investor was received with praise from economic scholars and everyday investors and continues to be a premier investing book today.

Editions

Since the work was published in 1949 Graham revised it several times, most recently in 1971–72. This was published in 1973 as the "Fourth Revised Edition" , and it included a preface and appendices by

. Graham died in 1976. Commentaries and new footnotes were added to the fourth edition by

Jason Zweig Jason Zweig is an American financial journalist. He has been a columnist for ''The Wall Street Journal'' since 2008. Biography Zweig received his B.A. from Columbia University in 1982. He also studied Middle Eastern history and culture at the ...

, and this new revision was published in 2003. *''The Intelligent Investor'' (Re-issue of the 1949 edition) by Benjamin Graham. Collins, 2005, 269 pages. . *''The Intelligent Investor'' by Benjamin Graham, 1949, 1954, 1959, 1965(Library of Congress Catalog Card Number 64-7552) by Harper & Row Publishers Inc, New York. *''The Intelligent Investor'' (Revised 1973 edition) by Benjamin Graham and

. HarperBusiness Essentials, 2003, 640 pages. . *''The Intelligent Investor'' (3rd Revised Edition) by Benjamin Graham and

. Harper Business, 2024, 640 pages. . An unabridged audio version of the Revised Edition of ''The Intelligent Investor'' was also released on July 7, 2015.

Book contents

2003 edition * Introduction: What This Book Expects to Accomplish * Commentary on the Introduction #Investment versus Speculation: Results to Be Expected by the Intelligent Investor #The Investor and

Inflation In economics, inflation is an increase in the average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI). When the general price level rises, each unit of curre ...

#A Century of

Stock Market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange a ...

History: The Level of Stock Market Prices in Early 1972 #General Portfolio Policy: The Defensive Investor #The Defensive Investor and

Common Stocks Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other Com ...

#Portfolio Policy for the Enterprising Investor: Negative Approach #Portfolio Policy for the Enterprising Investor: The Positive Side #The Investor and Market Fluctuations #Investing in Investment Funds #The Investor and His Advisers #Security Analysis for the Lay Investor: General Approach #Things to Consider About Per-Share Earnings #A Comparison of Four Listed Companies #Stock Selection for the Defensive Investor #Stock Selection for the Enterprising Investor # Convertible Issues and

Warrants Warrant may refer to: * Warrant (law), a form of specific authorization ** Arrest warrant, authorizing the arrest and detention of an individual ** Search warrant, a court order issued that authorizes law enforcement to conduct a search for eviden ...

#Four Extremely Instructive Case Histories and more #A Comparison of Eight Pairs of Companies #

Shareholder A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...

s and Managements:

Dividend A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex ...

Policy #" Margin of Safety" as the Central Concept of Investment * Postscript * Commentary on Postscript * Appendixes #The Superinvestors of Graham-and-Doddsville #Important Rules Concerning Taxability of Investment Income and Security Transactions (in 1972) #The Basics of Investment Taxation (Updated as of 2003) #The New Speculation in Common Stocks #A Case History:

Aetna Aetna Inc. ( ) is an American managed health care company that sells traditional and consumer directed health care insurance and related services, such as medical, pharmaceutical, dental, behavioral health, long-term care, and disability plans, ...

Maintenance Co. #Tax Accounting for NVF's Acquisition of Sharon Steel Shares #Technological Companies as Investments * Endnotes * Index