The Intelligent Investor (Hardcover)

Graham ponders the weighting between high-grade bonds and equities for the two different investors, and suggests on the portfolio's equity selection criteria. In short, Graham advises the enterprising investors to follow "sound but unpopular" strategies, the unpopularity indicating "value" could be at hand.

Surprisingly, for a book about individual investment philosophies, Graham touches upon Investment Funds and an investor's advisers. He takes the opportunity to reiterate the differences of investment against speculation: "The most realistic distinction between the investor and the speculator is found in their attitude towards stock market movements." Finally, he sums up the secret of investment into three words: "MARGIN OF SAFETY - Investment is most intelligent when it is most businesslike". In summary, the writing style doesn't make it the easiest of reads but despite that it really is a must for serious personal investors.

With so many stocks beaten down over the last few years, this is a good time to think about value investing. Also, remember that you can buy value investing indexed mutual funds now. And these have done well through 2003, especially the ones that focus on small capitalization stocks.

In March 2000, many people considered value investing about as useful as high-button shoes. If they had thought about value investng, they would have had another measure of how overpriced the market was. As a result, losses could have been avoided.

On the other hand, value investing will make you money more often than momentum investing will over the years. Long-term studies have shown that small cap value stocks beat the S&P 500 over time.

So even if this does not seem like this approach is right for you, you should learn more before rejecting this alternative.

Here's another reason why: Almost all stocks will be volatile relative to their average p/e, price/cash flow, or price/revenue ratio. By paying attention to this volatility, you can learn a lot about when to buy and sell a given stock. Astute traders based on value principles can also use options to lock in even larger profits, taking the normal ebb and flow of valuation into account.

Those who envy Warren Buffett's track record should understand these principles as well, because these ideas are the basis for some of the Buffett investing style. He later added a perspective on stock markets and human psychology that Graham did not have: Brand names which are attached to quality products and services will tend to outperform the market, especially when they have the potential to expand their geographical distribution around the world and to add new products.

Another benefit of understanding the lessons in this book is to help you know when value investors will probably want to start buying a "beaten down" stock, which will often mark the beginning of the stock's turnaround.

You will look in vain for a better book on value investing, and understanding this subject is like going to Driver's Education when you are learning to drive. It is an important groundwork for being a safe investor.

The most important concept you will ever learn as an investor is that avoiding losses is more important than making gains. It is too hard to make up for the losses, so make more careful buys in the first place and be prepared to leave before your precious capital is dissipated.

If you are a new investor, another lesson for you will be the need to establish a discipline to how you invest. This book will give you a good sense of how that can be done.

Otherwise, the stock market can be an expensive form of gambling. Please do buy, read, think about, and use the insights of this book to create more value for yourself and those you care about. We will all be richer if you do.

After you have finished enjoying this book, I suggest that you also think about where else in your life you should be careful not to make big mistakes. How about in your relationships?

May your wealth compound safely and intelligently for you!

Remark : but this book is dated on a few topics.