Sunday, 3 February 2013

Books - The Intelligent Investor

Don't be fooled by the plain look.
This Book is Gold.  

One of my more recent financial read was “The Intelligent Investor” by Benjamin Graham, written in 1949 and most recently updated in 2003.  The first thing that I must say about this book is that it is definitely not for a novice.  I consider myself fairly well read for someone who has not made a career out of finances.  However, I would be lying if I told you that I understood more then 75% of what was written.  Given that it is quite a large book that 25% is a fairly sizeable chunk. 

Despite this The Intelligent Investor is one of my favorite financial reads.  Even missing out on a quarter of the material what I read rewrote how I think about investing.  Many in the financial world consider Graham’s book to be the foundation textbook on how to invest in bond and the stock market. 

Graham splits the population into two groups of investors.  The Warren Buffets of the world who try to (and sometimes succeed to) beat the markets.  Then there is the other 95% of the population who’s goal should be to match the markets rather then to beat it.  Gram clearly lays out the basic strategies needed for both of these populations. 

That said when this book was originally written there was no such thing as an index fund (a passively managed mutual fund that follows a market index such as the S&P or Dow Jones.)  Index funds are a much easier (and cheaper) way to match the markets then buying individual stocks of bonds and are what I would recommend for the average investor. 

However, the beauty of The Intelligent Investor is not its plan for picking stocks but it’s carefully laid out and researched explanation as to why matching the market is the best bet for the average investor.  Everything Graham recommends is backed up by 50 years of data.  At some points he even goes back to the 1800’s in order to substantiate his reasoning. 

The Intelligent Investor is by no means a book for the beginner.  However, it is a wonderful read once you have a firm understand of investment vehicles and general economic principles.  Intermediate and advanced readers will have their limits pushed and broaden their understanding of economics and prudent investing.  The best aspect of the book is the firm understanding it gives you of whys behind the advice that it provides.   

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