Book Review: The Intelligent Investor


“The Intelligent Investor is a realist who sells to optimists and buys from pessimists”- Benjamin Graham

As I've finally finished reading this book while vacationing in Hawaii (you can see I was reading this book poolside), I'm going to attempt to do a review of the Intelligent Investor.  It is possibly the best investment book ever written.  I know my review won't do the book justice, but I wanted to share with you what I thought of this book.  I feel that The Intelligent Investor should be read by every investor BEFORE they invest- I wish I did the same, as I would have done a lot of things quite differently.  Hindsight is 20/20 of course, right?

Basically The Intelligent Investor is so thorough, it pretty much reads like a textbook- it even has an index at the end of the book.  It's easier to read than a text book (don't worry Gen Y's) and is very interesting and gives you a lot of “ah-ha!” moments.  So who is Benjamin Graham?  He's definitely not as “famous” as Warren Buffett, but he was Warren Buffett's mentor and inspiration.  Benjamin Graham is quite possibly the best investor in history- he was Warren Buffett's teacher, for goodness sake.

The book has 20 chapters and each chapter is followed by commentary from Jason Zweig, a senior writer at Money magazine.  Jason gives a more “updated” perspective on the chapter written by Benjamin Graham.  He gives modern-day context to the Benjamin Graham excerpts.

So here I go detailing each chapter.  Note that the titles that I have for each chapter do not reflect the actual titles of the chapter.  My review is going to be very brief, but if you like the book, you should go get it.  I'm sorry I'm not going to give away my copy of this book because I've already dog-eared all the good pages lol.

Chapter 1: Investment vs Speculation

This chapter basically explains the difference between investing and gambling.  I know it may sound completely different, but if you don't know what you're investing in, you're basically gambling but lying to yourself.  This chapter tells you how to analyze a company for its value and not surrender to hype or the “next big thing” (e.g. internet stocks and the dot com boom).

Chapter 2: Investing and Inflation

Chapter two basically recommends you hold bonds (and not 100% stocks) to protect yourself.  They also suggest you protect yourself from inflation with REITs or treasury protected securities.  Of course if you want more detail, go read the book!

Chapter 3: Learning from history

This chapter focuses on the history of the stock market in the past century (and that every bull market comes to an end- same goes for bear markets).

Chapter 4: General Portfolio Policy

Benjamin Graham recommends holding 50% stocks and 50% bonds/cash.  It wouldn't suck so much when your stocks tank to 50% what you invested in it with half of your portfolio in bonds and cash.

Chapter 5: Be defensive

This chapter tells you not to buy a stock just because you like their product (e.g. you like Starbucks therefore you buy the stock).  You need to do an analysis of the financial statements to protect yourself from a risky investment.

Chapter 6: The Don'ts of Investing

Basically telling us NOT to day trade (your broker will always profit, but you will always not profit).

Chapter 7: The Do's of Investing

Benjamin Graham says growth stocks are fantabulous and bargain hunting is fantabulous.  We need to change our mind from “omg! The stock market is tanking! The sky is falling” to “Yay! I can buy me some good companies at a discount”.  This is easier said than done due to our hard-wired brains to think otherwise.

Chapter 8: Market Fluctuations and realizing they will happen

Chapter eight basically says that market fluctuations will happen and always happen, and that the key should always be buy low and sell high (and not the other way around).  They have a great analogy (and my favourite take-home message of this book) in this chapter of Mr. Market- he's manic depressive and you can't succumb to his whims.  You need to control him and use him to YOUR advantage.

Chapter 9: All about Funds

Benjamin Graham gives a few reasons why investing in funds might not be so hot (a lot due to “behind the scenes” reasons) and why any beginner investor should just invest in a total stock market index fund.

Chapter 10: The Investor and His Advisers

This chapter talks about where investors nowadays are getting their information on which stock to invest in.

Chapter 11: Security Analysis

This chapter goes in depth about what you need to look for in terms of security analysis and how to read financial reports to make sure you are investing in a good company.

Chapter 12: Things to consider in per share earnings

Benjamin Graham illustrates the accounting hocus pocus that some companies can do to make their earnings look better than they actually are.

Chapter 13: Comparison of Four Companies

Here's where the textbook similarity comes out.  Benjamin Graham compares four companies and shows you what to look for.

Chapter 14: Stock Selection for the Defensive Investor

This is an excellent chapter- they talk about seven things to look for when evaluating whether a common stock is up to snuff (e.g. a P/E ratio of less than 15).

Chapter 15: Stock Selection for the Enterprising Investor

Basically sums up to finding bargains and practising finding bargains.

Chapter 16: Convertable Issues and Warrants

B.G. explains what these are and why they're important to look at.

Chapter 17: Four Extremely Instructive Case Histories

Super detailed commentary of what happened with four stocks and why they did well or why they tanked.  Jason Zweig provides an updated commentary on stocks we know in current times, such as how AOL bought Time Warner.

Chapter 18: Comparison of Eight Paris of Companies

Again, more practice looking at companies to see if they're up to snuff for your investing dollars.

Chapter 19: Dividend Policy

This chapter talks about the pros and cons of companies that do or don't distribute dividends.

Chapter 20: Margin of Safety is the main concept of investing

The final chapter talks about risk and how to minimize it.  Breaking even is really hard when you've suffered a huge loss, like if you're down 90% of your investment.

PHEW! Again my review does not do this book justice.  Go get it and read it.  It's well worth it.

Readers: Have you read this book? What did you think?


  1. Money Reasons on November 17, 2010 at 9:16 am

    I’m sad to say that this is one of the few great financial books that I haven’t read yet!

    If you say that it’s good… Then I will read it, because I know that your advice is spot on 🙂

  2. Robert on November 17, 2010 at 10:57 am

    I’ve read and greatly enjoyed the book. I agree that every aspiring investor should read and understand the book before beginning. Some years, it’s difficult to find stocks that fit Benjamin Graham’s criteria, but it pays to be patient. That’s possibly the most difficult aspect of investing.

  3. young on November 17, 2010 at 6:51 pm

    @Money Reasons- It really is good! Kind of a dense read (it took a lot of concentration from me lol) but really good. Let me know what you think too after you read it 🙂

  4. young on November 17, 2010 at 6:52 pm

    @Robert- Yes- you have summed it up 🙂 Patience is the most difficult yet most rewarding aspect of investing. Glad you liked the book too.

  5. Evan on November 17, 2010 at 8:29 pm

    I haven’t read that one yet. I’d love to read a story about him…did he ever put out an autobiography?

  6. young on November 17, 2010 at 10:46 pm

    @Evan- I don’t know if he ever put out an autobiography, though this book talks about his character and investing style a lot. It’s really a good book- changed my perspective towards investing. Instead of “should I? should I?” I go “nah, that’s too expensive. I’ll wait until the right opportunity to buy”. He’s a big fan of dividends too (and I know you are!).

  7. Robert @ The College Investor on November 18, 2010 at 10:57 am

    The Intelligent Investor is a great guide for anyone who wants to get into investing in more depth than an index fund.

    I actually read the book on my trip to Hawaii earlier this year, and now I keep it handy on my bookshelf to reference it every now and then!

  8. young on November 18, 2010 at 10:24 pm

    @Robert- Agree! Hey, we both read this book in Hawaii! That is actually my towel I was using while lounging at the pool reading the book. I thought it looked nice contrasting against the red book lol. It’s definitely a great reference book since it even has an index!

  9. Andrew Hallam on November 23, 2010 at 2:59 am

    Young, you’re probably going to tell me to “get a life” but I read that book all the time. I started reading it in the late 90s, and I always go back to it. Like all great books, I get something different out of it each time. It’s a bit like the Bible, I guess. If Graham and Buffett represent your religion, you can’t read it just once. The closest to a Graham Biography is probably Janet Lowe’s book, Benjamin Graham–On Value Investing. She delves into his life. But once you read more about him, I don’t think you’d like him much on a personal level. As a strong woman, you probably would have slapped him if given the chance. He sure did some funny things. When his son died, he flew to France to pack up his son’s belongings. His wife stayed at home. But then Graham shacked up with his dead son’s girlfriend–and eventually, they got married. Graham was always trying to get lucky, from what Janet Lowe suggests. But I’ll say this: the man was a genious. If you want to read something else really cool, check out the book, The Rediscovered Benjamin Graham. You’ll be impressed with how clearly and brilliantly the man thinks. I can’t stop reading Benjamin Graham, and I don’t think I’ll ever be able to stop!

  10. young on November 23, 2010 at 8:03 am

    @Andrew- Wow- you almost just ruined Benjamin Graham for me with that story! haha 🙂 I didn’t know he was into getting lucky- he seems so pragmatic- does he not “value invest” when it comes to women too? 🙂 Thanks for the tips on the books. I was going to say that the Intelligent Investor is like a Bible, but I didn’t want to offend any religious readers- but I totally agree. No, I’m definitely not going to tell you to get a life- you have a life in Singapore- I want your life!! 🙂

  11. Mark on November 27, 2010 at 10:27 pm

    I have read this book three or four times. It is the best book ever on investing. I use the book all the time as a frame of reference. The principles are timeless!

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