| The Intelligent Investor | |
|---|---|
2003 edition, updated by Jason Zweig |
|
| Author(s) | Benjamin Graham |
| Country | USA |
| Language | English |
| Subject(s) | Finance |
| Publication date | 1949 |
The Intelligent Investor by Benjamin Graham, first published in 1949, is a widely acclaimed book on value investing, an investment approach Graham began teaching at Columbia Business School in 1928 and subsequently refined with David Dodd. Famous investor Warren Buffett described it as "by far the best book on investing ever written",[1] a sentiment echoed by other Graham disciples such as Irving Kahn and Walter Schloss.
Contents |
The content of the book Value Investing already exists in its predecessor Security Analysis. Value investing (which differs from the speculative strategies like "momentum trading" or "technical analysis") objects to the economic assumption that the stock market is efficient. Efficient in this context means the market as a whole always knows the important information about a company. The consequence of such an assumption is that there can be no wrong valuation of the stocks. The price of a stock always (at least in most cases) reflects the fundamental value of a company.
The idea of value investing is to buy stocks whose price is lower than their true value and then to hold those stocks until their price returns to the true value earning a return on the investment.
Graham's favorite allegory is that of Mr. Market, an obliging fellow who turns up every day at the share holder'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. 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.
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 ISBN 0-06-015547-7, and it included a Preface and Appendixes by Warren Buffett. Graham died in 1976. Commentaries and new footnotes were added to the fourth edition by Jason Zweig, and this new revision was published in 2003.[2]
2003 edition by Benjamin Graham and Jason Zweig