After two years into my investing journey, I decided to re-read the book. And I find that I have a greater appreciation of the book after having real life, hands on experience in studying companies, choosing stocks, and buying/selling. Nothing beats trading with your hard earned $.
"The Intelligent Investor" is a classic investment book and I am sure that many people will agree with me that it is a must read for people who are intending to or who are already into stocks as an investment medium.
I have re-read about a quarter of the book and so far I have highlighted the following five points for sharing:-
1. To invest successfully over a lifetime does not require a high IQ, unusual business insights or inside information - what is needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. By developing your discipline and courage, you can refuse to let other people's mood swings govern your financial destiny. It means being patient, disciplined and eager to learn, you must also be able to harness your emotions and think for yourself.
- Agree. Emotions are a no-no in investment. You must develop your own investment philosophy which is unique and tailored according to your risk appetite, your commitments and your temperament.
2. A stock is not just a ticker symbol - it is an ownership interest in an actual business, with an underlying value that does not depend on its share price. The market swings between unsustainable optimism (making stocks too expensive) and unjustified pessimism (making stocks too cheap). An intelligent investor is one who sells to optimists and buys from pessimists.
- Agree. Always look for value or bargains in businesses, while considering the broad economic climate, before buying a stock. You must be happy to be part of the business, and do not mind holding on to it (in case market trends downwards).
3. Future value of every investment is a function of its present price - higher the price, lower the returns. Benjamin Graham emphasizes on Margin of Safety - never overpaying, no matter how exciting an investment seems to be. This is because the chance of being wrong is always there (never know how Mr. Market behaves the next minute).
- Somewhat agree. It's a cross between buying at a bargain and riding the wave. I do agree on the margin of safety - it is important to avoid overpaying for a stock, as I know from my early stock buys in 2011 (such as ECS, Keppel Land, NOL...). Always know what you are buying.
4. The intelligent investor realizes that stocks become more risky as their prices rise, and less risky as their prices fall. He dreads a bulls market which makes stocks more costly to buy, and welcomes a bear market since it puts stocks back on sale. Even though investors know they are supposed to buy low and sell high, in practice they often end up getting it backwards.
- Agree. The best moment to buy is when market starts to turn around. Prices of stocks look high now.
5. The art of successful investment lies first in the choice of those industries that are most likely to grow in the future and then in identifying the most promising companies in these industries. The search for a stock to buy is not worth the investor's efforts unless he could hope to add 5% before tax to the average annual return from the stock portion of his portfolio. It is important to measure your investing success by how much you keep after inflation and not just by what you make.
- In theory yes, but difficult to put into practice. I need to work on the 5% increase to portfolio stocks, and not spend too much time on those 1-2% ones.
You can read the reviews from others and/or get the book from Amazon here:-
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)
Disclaimer: The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.
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