The Intelligent Investor PDF


I cite the main theses of Benjamin Graham's book and share my thoughts on this: I try to shift his ideas to modern reality and the behavioral model of the intelligent investor PDF.

The Intelligent Investor PDF

The Intelligent Investor PDF review

The first thing Benjamin Graham does is define an investor.

An investor is someone who invests money in assets in order to preserve the invested funds and receive not ultra-high, but stable and acceptable profit under certain conditions. This goal is achieved not through luck, excitement or trust in the market, but through a thorough analysis of the financial situation. Everything that does not comply with these conditions passes through the category of speculation.

Next, Graham hurries to dispel the very common misconception that investing is available only to geniuses, and an ordinary person cannot make money on the stock market:

The investor's reasonable behavior has no direct relation to the IQ value. A reasonable investor is, first of all, a patient person who controls his emotions, and this is a property of character rather than intelligence.

Isaac Newton

Further, the author cites the example of Isaac Newton, who lost $3 million (translated into modern money) on the hype shares of the South Seas Company. "A great mathematician does not mean a great investor." And Graham lost almost all of his capital during the Great Depression. This, too, by the way, should be taken into account

And it is really very important to understand that psychology, not intelligence, brings success in the stock market. The main thing is a cool head and patience. Many underestimate this quality, but those who bought shares of Moderna for $ 20 and continue to hold them until now already have a yield of 1000%. But there are only a few of them: most earned 20-100% and sold papers. And here it is worth referring to the words of the classic "Why sell growing stocks at all?" (W. Buffett). But this is the main problem for our investors. It's okay to get a 20% yield, can't stand it and sell. We have a very popular proverb "a bird in the hand is better than a crane in the sky." And Buffett was talking about companies that regularly pay dividends. Then really why sell. And if you bought something incomprehensible, then maybe it's better to sell it while there is at least some profit. There is rather another saying here: "At least a piece of wool from a black sheep." But the problem is that people will see a paper loss and immediately click "sell". But here you need to understand that you have not lost anything and have not earned anything until you have sold your stocks.

A reasonable investor does not follow the growth of shares, but the state of the company

Perhaps this is the central idea of the whole book. By buying shares, an investor buys a stake in a business. And if this business is good, then the drop in quotations should not frighten the investor, because he will rather be happy about the "sale" and buy more securities.

Graham offers two investment portfolio options:

  • passive
  • active

A passive investor does not want to participate in portfolio management at all and simply receives dividends and coupon returns. In this case, the share of bonds can reach 75%.

It is worth including shares of 10-30 most reliable companies in the portfolio, including only shares of large and successful corporations. It's hard to argue with this. Today, even 10 companies are not considered optimal diversification. Now there are ETFs on the market that allow you to invest in dozens, hundreds or even thousands of companies at once. But it is very important that this diversification is present. Our investors often ignore this principle and add shares of only one company to the portfolio for all the money, and most often illiquid from the third echelon. And Graham warns not only against this, but also against buying shares in only one successful company. It would seem that Apple shares are always growing. So why buy something else? But we are facing a classic mistake: profitability in the past is not a guarantee of future success.

The Intelligent Investor PDF

And then Graham just says that 90% of the portfolio should be directed just to the purchase of index fund units, and the remaining 10% to independently selected companies.

The best investors are interested in a company not when its shares rise, but when they fall.

Here, unfortunately, there is another inconsistency. Most investors want to have time to jump into the soaring "rocket". Few people are willing to buy shares during the drawdown of its value, because it is impossible to guess when it will end. But it is precisely such investments that bring the greatest returns: a year ago we all became convinced of this. On the other hand, you need to be careful in this: not all stocks that have fallen will necessarily return to the previous price. Or they will grow, but in the long run. So, it took Vipshop shares 6 years to return to the previous record in 2021. Now the fall is back: no one knows if it will be won back in six months or 5 years,

The market only calls the price, and whether to follow it is the investor's business

And indeed. No one forces you to buy stocks at one price or another. You don't have to buy if you think the price is unreasonably high. But if you buy Tesla shares for $850 after the split, then this is your decision.

Benjamin Graham still writes a lot of things, but the main thing he says is that it's not worth "putting all the eggs in one basket", going on hype and ignoring dividends (dividends may seem insignificant against the background of general growth, but they will give excellent results in the long run).