Benjamin Graham was one of the greatest practical investment thinkers of all time. After his widowed mother lost all of their money in the financial crash of 1907, his family fell into poverty. Yet, Graham turned this around. Studying at Columbia University, he went on to work at Wall Street, going from clerk to an analyst to partner before running his own investment partnership. Consequently, he amassed a wealth of historical and psychological knowledge concerning the financial markets that spanned several decades. And he shared that knowledge in his book, The Intelligent Investor.

In ‘The Intelligent Investor,’ little time is spent discussing the technique of analyzing securities. Instead, great focus is placed on investment principles and investors’ attitudes. Although ‘The Intelligent Investor’ was first published in 1949, the underlying principles of good investment do not change from decade to decade. Consequently, in ‘The Intelligent Investor,’ Benjamin Graham aims to teach us three things:

1. How to minimize the chances of suffering irreversible losses
2. How to maximize the chance of achieving sustainable wins
3. How to overcome self-defeating modes of thought that often prevent investors from reaching their full potential

To be an intelligent investor, you must be patient, disciplined, and eager to learn new things. You must also be able to control your emotions and think for yourself. Graham states that the intelligence needed to be a good investor has much more to do with character than it does IQ. Throughout this ‘The Intelligent Investor’ summary, we shall explore some of the key investment takeaways, and the Benjamin Graham formula for smart, successful investing.

Graham is keen to mark out an important difference between investors and speculators (i.e., Wall Street brokers). According to Graham, intelligent investing consists of three things:

1. A thorough analysis of a company and the soundness of its business practices before the purchase of any of its stock
2. Making sure that you are protected against any severe losses
3. Not aspiring to extraordinary results, but aiming for “adequate” performance

For an intelligent investor, money isn’t made simply by “following the market,” i.e., buying a stock, because its value has gone up, or selling a stock because its value has waned. Graham argues that the exact opposite is true, positing that stocks become riskier the more their value increases and vice versa.

Whereas an investor believes the market price is judged by established standards of value, a speculator bases all of their standards of value on the market price, which is a significant difference. An excellent way to check if the market is swaying your value judgments is to ask yourself whether you would be happy to invest in a particular stock if you were unable to know its market price. That way, you have to rely on your intuition. 

For this reason, it’s vital to point out that, unlike the speculator, the intelligent investor isn’t investing for quick wins. The only way to reach long-term investment goals is to make sustainable and reliable decisions that are not subject to the whims of the often volatile stock market. 

This is a must-read to ensure we have all the necessary information about investing and making the right financial decisions. 

Happy reading!