Book Review: The Intelligent Investor (Benjamin Graham)
Viewed by some, including a certain Mr Warren Buffet, as the book on investing, and in particular, value investing, it seems of little consequence the opinion of a law undergraduate on the writings of Benjamin Graham, a world famous investor and academic. However, one of his most famous works, The Intelligent Investor, has emboldened me to believe that my opinion does matter; that the analysis and skill of the individual is powerful. I would be doing a disservice to the book’s teachings if I were to view myself as unable to execute my own decisions.
The book, of over 500 pages (including updated commentary), highlights the relative easiness with which one can achieve average results on the stock market, if one can think for themselves. On the contrary, Graham highlights the difficulty in outperforming the stock market, especially if you are to be caught up in the bright lights of Wall Street. It is evident throughout the book that obtaining average results is not the underwhelming and futile task outsiders and Wall Street believe it is - £1000 invested in the S&P 500 in Jan’ 1990 would now be worth over £15000, a 1400% return. That is to say that average is not bad nor underwhelming, but rather, financially powerful.
The main question is whether The Intelligent Investor is worth reading; I implore anybody who wishes to invest to do so. Graham is forthright in his opinion that investing is inherently value investing and that all else is speculation. While he is dogmatic in his approach, his evidence would suggest that this is so. Further, for those who are intimidated by financial markets, the book winds its way through key knowledge and jargon which will enrich any amateur, even if they fundamentally disagree with the book’s perspective.
Other than its unrelenting promotion of value investing, The Intelligent Investor is worth reading to understand Graham’s cynicism towards Wall Street. It is a truism that investors get their fingers burnt during bull markets - the excitement of Wall Street and the flawed allure of endless returns wipes the memory of previous market stings which inevitably return. Understanding this enables investors to reap the rewards of long-term stable returns, sitting comfortably during economic downturns as small current losses will be long forgotten in 20 years.
For any student or beginner investor, this book is golden. It enables the reader to recognise the facade that is Wall Street; to make sound investment, not speculative, decisions; and highlights the utility of average returns, cutting through the hullabaloo, noise and excitement that pervades investing culture. Finally, Graham teaches the reader that humans are flawed in their judgment and to recognise and consider this is fundamental to becoming an intelligent investor who, though flawed, can and should make intelligent financial choices.
The Intelligent Investor by Benjamin Graham is available to buy from all good book stores, as well as on Amazon here: https://www.amazon.co.uk/Intelligent-Investor-Definitive-Investing-Practical/dp/0060555661/ref=sr_1_1?dchild=1&keywords=intelligent+investor&qid=1592303187&sr=8-1