I am so excited to blog about this!!!
Earlier this month, I have finally managed to finish reading “The Intelligent Investor” by Benjamin Graham. This has been my third book on investing that I’ve read so far within a span of 3 to 4 months and I can’t imagine how lucky I am to have read this before going head on with my investment career. It is very unlike me to buy something from a retail bookstore due to my spending habits but I wanted to get my hands on the book as soon as possible, so I walked in to Kinokuniya and got a copy.
And yes, I used my credit card to pay for it. :p
It was worth Every. Single. Cent.
If you noticed the words on the cover page in smaller print, you would be aware that this book is regarding the concept of value investing. Value investing is an investment strategy that Warren Buffett has learnt from Benjamin Graham during his earlier years and have since adopted it to create tremendous wealth, to the point of overtaking Bill Gates and becoming the richest man in the world in 2008. If you’re an avid fan of him like me, then you would know that he has read this book since he was 19 and it has changed his perceptive about the stock market and how to purchase stocks.
In the preface and the appendix, Warren Buffet himself has also wrote excerpts of his views regarding this book. There are many nuggets of wisdom in this book and I even took the effort to label them all out using sticky labels.
So colourful, hor?
Here’s are some of my thoughts and knowledge that I’ve gained from the book.
1) It is brutally honest
What I love about this book is that Benjamin Graham has no qualms of mentioning how people lose money in the stock market just because of bad temperament. Being human and emotionally attached, a moment of folly could cause you much more pain that you can take. And if you can’t be emotionally stable, the chances of you making even more mistakes are almost inevitable.
The entire book also has a pessimistic vibe and constantly warns you to be wary of your decisions in the stock market. This is very unlikely of your broker or financial consultants as they will almost never tell you that there would be a chance for you to lose money.
2) It has common sense (and very sound stories)
It is contradicting that not every one has common sense, as “common” as it should be. Graham always explains things so simply and uses daily life analogies to describe how we can see the same situation in different perspectives.
The analogy that I love the most, and probably the one he is most famous for, is how he described the stock market. Mr Market – as so he calls it – is a dude with anger management issues, and sometimes a very good salesman. Everyday, his store is open and he sells all kinds of businesses at different prices. It is up to you to decide what price you are willing to pay for each business and whether it would be a good deal eventually.
Man, I don’t think there is anyone else who would describe the stock market as simple as that.
3) The defensive investor versus the aggressive investor
Graham categorizes investors into two kinds – namely the defensive and the aggressive – and both take a distinctly different approach towards investing in the stock market. He does not recommend you to sit on the fence. There are separate chapters for both investors. Without a doubt, I have chosen the route to becoming an aggressive investor and are applying some of the rules that he has mentioned in the book.
4) Managing risk versus speculation
Some people might think that putting your money in the stock market is equivalent to gambling. Not if you know what you are doing. Graham introduces the concept of the margin of safety and teaches you how you can determine the shortfall of the stock for the price that you pay.
5) Diversify to get more rights than wrong
Graham encourages diversification because there is a very low chance of you making the right decisions 100% of the time. Offering diversification into your portfolio increases the chances of you being right than wrong on an investment and thus producing an overall profit. Like the old saying goes, never put all your eggs in one basket.
I will definitely revisit this book from time to time.
I highly encourage anyone who hasn’t read this book before to read it, whether you are new to investing or even if you consider yourself a professional investor. If you liked my review and you are thinking of buying the book, you can go through my affiliate links by clicking either of the images below. If I’ve been more patient with getting the book, I would have bought it online instead. >_<” It is much cheaper than my original purchase price (discount of up to 45%!!!!) and there are free shipping options internationally!
Get “The Intelligent Investor” by Benjamin Graham from Amazon with prices starting from US$12.49 for a used book and US$13.76 for a brand new one. Free shipping to Singapore for total orders above US$125.
Another website, BetterWorldBooks.com is a place where you can purchase the book. Used books start from prices at US$23.04. Remember to check the “Carbon Balanced Shipping” fee of US$0.05 to support their Carbon Offset initiative to reduce carbon dioxide emissions and global warming due to modes of transportation.
Don’t forget me!! >_<~
Do note that this edition of the book is much more lengthy than the original version as it has added commentary after every chapter to bring a fresher perspective using more current events.
Are you also a value investor? Have you also read the book? Share your thoughts and comments below! 🙂
Thanks for reading!
Miss Niao xoxo
EDIT (19-July-2017): Hey guys! Thanks to Muzyma, there is a FREE PDF version of the older 5th edition of The Intelligent Investor. Please click here to access it. If you would still like the latest 6th edition which was the book that I read, or prefer a physical copy, please refer to the links above. 🙂