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The intelligent Investor Summary

Author Benjamin Graham objective is to provide an investment policy book for an ordinary investor. The typical investor has a tendency to follow the market instead they should be doing Portfolio Risk Management Strategies

The Intelligent Investor puts special emphasis on 3 Strategies

  1. Risk management of Portfolio through Asset Allocation and Diversification
  2. Maximising probabilities through valuation Analysis and Margin of Safety
  3. A disciplined approach that will prevent consequential errors on Portfolio

Investment Vs Speculation – Activities of Investment and speculation are separate. If you must speculate, Graham advises to limit their allocation not more than 10% of their investment funds

Intelligent Investing involves

  1. Analysis of Fundamental soundness in investment
  2. Calculated plan to prevent severe Loss
  3. The pursuit of reasonable return

Investor and Inflation – An investor must have a concern on the inflation, it lowers the value of the wealth created. 

Rule of Diversification  – Investors must be vigilant for the unanticipated. That means there is never a perfect time to be in only one asset category (don’t put all your eggs into one basket). The intelligent investor must minimize risk by anticipating the unforeseen. Diversification is the foundation of such a strategy.

The defensive investor is unwilling, or unable, to put in the time and effort required to be an enterprising investor.  Instead of an active approach the defensive investor seeks a portfolio that requires minimal effort, research, and monitoring.

Investor and Market Fluctuations – The stock market is prone to wild fluctuations. Many investors focus on timing the market. In other words, they try to predict the market through direction, momentum, or various other indicators they believe predict the future. 

Through out The Intelligent Investor, Graham demonstrates that the investor should use pricing to make buy and sell decisions. We want to buy stocks when they are priced below their fair value and sell stocks when they advance above fair value.

If every investor did their research and only bought stocks with a margin of safety and  below intrinsic value of the company.

Few key pointers that Mr.Graham has mentioned about stock picking are

  1. Strong Financial Condition
    1. Current Asset should be atleast 1.5 times of Liabilities
    2. Total debt to net current asset ratio to be lesser than 1:1
  2. Earnings Stability
    1. Positive Earnings for atleast 5 years
  3. Company should currently pays dividend
  4. Current earnings should be greater than a year ago
  5. Stock price should be 120% of Net Tangible assets.

And there are many more pointers available at The Intelligent Investor Book. This book is a manual for anyone who should be investing in stock market. I request every one reading this summary should also take a look at the Intelligent Investor Book at once.

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Sathish Kumar
Equity Fund Manager | Wealth Consultant | Author
Whatsapp / Call – +91 9841058689

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