The Intelligent Investor Book Summary: 2 Important Lessons

The Intelligent Investor by Benjamin Graham

The Intelligent Investor focuses more on value investment rather than going by the hype and selling the stock in one or two years, the Benjamin Graham author of this book will teach you how one can pick a stock and what kind of mistakes one should not make in the stock market.

Talking about myself, The Intelligent Investor Book has taught me, two lessons which we will talk about in a minute. Personally, I feel, that if you have never invested a single penny in the stock market then this is the perfect book for you but if you’re investing for a long time then you can skip the book.

Quotes

“But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.” – Benjamin Graham

“The stock investor is neither right nor wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.” – Benjamin Graham

“invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.” – Benjamin Graham

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The Intelligent Investor Book Summary

Benjamin Graham is known as the “father of value investing” and he has shared the same in this book along with some of the historical data on the stock market which will give you a clear idea of how the stock market works in the first place.

I think you may have heard two rules of investing that student (Warren Buffett) of Benjamin Graham talks about,

  • Rule No. 1: Never lose money.
  • Rule No. 2: Never forget Rule No. 1.

By the way, if you’re a trader then the Intelligent Investor book is not for you, you should rather learn about charts,

I will give you my example,

If I’m investing in the stock market then I will pick those stocks which I feel confident holding for more than 10 years.

I always check the yearly result of all the companies I’m holding and if I feel that, certain companies are not doing well or they won’t do well in the future then I re-shuffle my holding.

In short, I’m a long-term investor but I invest in growth-ordinated companies.

For example, if you want a 10% to 12% return then you can invest in companies like HDFC Bank, Reliance, or even HUL. These companies won’t make your money double or triple but you will have the safety of not losing money, it’s like a fixed deposit but with a high-interest rate.

On the other hand, we have companies like Tata Motors, Tata Power, Adani Power, and many more which can give you way better returns because these companies are working on EVs, so the chances are the stock price of companies will also go up because as we all say “EVs are the future”

FYI, I’m not a financial adviser, I have just given the example, if you want to invest in anything, first do your research, don’t ever invest because someone else is telling you.

That’s all, now let me share with you two lessons that helped me a lot in my investment journey…

  • Don’t Invest in IPO (Initial Public Offering)
  • If you’re entering into stock market then invest for at least 7 years

Don’t Invest in IPO (Initial Public Offering)

Have you a heard of PayTM, they launched the IPO at Rs 2150 per share, and guess what they listed at Rs 1955 while the day low was Rs 1564.

So if you have bought the 6 shares of PayTM at Rs 2150 which means you have invested Rs 12,600. On the listing day that Rs 12,600 will become Rs 9,384.

Here Benjamin Graham has said that the IPO price is decided by the large stakeholder of the company. These companies have invested their money from the beginning, so they also want to make a profit.

Let’s say, the X company has sold the 10% to Y for Rs 10 per share. So whenever, the X company goes public and if the Y company is the largest stakeholder of X company then the Y company will make a huge impact on choosing the share price and that is what happened with PayTM.

When X company got listed, the big investor will take the profit out of it and if the company is not delivering a good profit then the price of the particular company will also go down, and again, the same happened with PayTM.

So the moral of the story is, stay away from the IPO and if you feel that, the coming up IPO is good then wait for some time, and when the stock currents, you can take a position.

The key factor in the stock market is patience.

Be Long-Term Investor

I have already said that, if you’re investing in the stock market then pick good companies and stick to these companies for a long time, Benjamin Graham has said, a minimum of 7 years is a must for the stock market.

“A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.” – Benjamin Graham,

By the way, I invest for 10+ years, depending on the company I choose…

By the way, when you invest for the long term, you don’t have to check the stock market every day, select one date and stocks and invest in those companies every month, regardless of the market condition.

Conclusion

Again, the same thing,

If you have never invested a single penny in the stock market then this is the perfect book for you but if you’re investing for a long time then you can skip the book.

Still, if you want to read the book then I would recommend you to read chapter number 8 & 20.

  • Chapter 8 – The Investor and Market Fluctuations
  • Chapter 20 – “Margin of Safety” as the Central Concept of Investment

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