The Intelligent Investor

A Classic First Published in 1949

The Definitive Book on Value Investing

by Benjamin Graham

Important: do not try and read this book from cover to cover. Many of the chapters are not relevant today. However, Chapters 8 and 20 are two of the most important written to help investors understand how to think about investing.

"By far the best book on investing ever written"

Warren Buffett

Warren Buffett: "Chapters 8 and 20 have been the bedrock of my investing activities for more than 60 years," he says. "I suggest that all investors read those chapters and reread them every time the market has been especially strong or weak."

Graham's philosophy of "value investing" -- which shields investors from substantial error and teaches them to develop long-term strategies -- has made The Intelligent Investor the stock market bible ever since its original publication in 1949.

Chapter 8: Mr. Market

One of Benjamin Graham’s favorite parables is that of Mr. Market. Graham’s Mr. Market is a fellow who turns up every day offering to buy or sell his shares at a different price. Often, the price quoted by Mr. Market seems plausible, but sometimes, it is ridiculous (sometimes very high and sometimes very low). The investor is free to either agree with his quoted price and trade with him, or to ignore him completely. Mr. Market doesn’t mind this, and will be back the following day to quote another price. Graham’s point is that the investor should not regard the whims of Mr. Market as determining the value of the shares that the investor owns. He should profit from market folly rather than participate in it. The investor is best off concentrating on the real life performance of his companies and their dividends, rather than being too concerned with Mr. Market’s often irrational behavior.

Chapter 20: Margin of Safety - the central concept of successful investing

Only purchase stocks when the market price is significantly below your estimate of its intrinsic value. The difference between the price paid and the estimated (intrinsic) value is the margin of safety. This difference allows an investment to be made with minimal downside risk.

Warren Buffett: “Buy stocks the way you buy groceries, not perfume.”