Book Summary: The Intelligent Investor

Chapter 1: investment vs speculation
Investment= something upon thorough analysis promises safety of principal and an adequate return
Nothing is predictable. Bonds are generally safer than stocks but bonds too have fluctuated wildly in the past.
Two kinds of investors: defensive and enterprising
Do not follow things that are popular on wall street
Experts are not really experts. Remember career counselors.
Investing is more about character than intelligence.
Divide your holdings into stocks and bonds with 25 in each at least
Real estate is another potential place to invest

Chapter 2: inflation
Past inflation is not a good predictor of current inflation
In this case, bonds become less attractive
Interestingly debt of corporations has become 5x while the earnings have doubled
A little inflation might be indicative of good business
Public utility companies street since they can’t raise prices due to regulatory factors
Investing in things is also not always safe
Inflation eats your profits
Chapter 3: past decades
Past is never a good predictor of the future
Graham presents a comparison of the stocks over the past 70 years
The higher they go the harder they fall
Schiller ratio.= Current price/ average corporate earnings over the last 10 years: above 20 is usually a poor letter below 10 is great.
Chapter 4: portfolio policy
Usual myth: rate of return is dependent on how much risk you’re willing to take.
Fact: it’s actually how much effort you’re willing to put in to learn
Suggested: between 25 and 75 for both stocks and bonds
Choice of bonds: tax question and long versus short term
Tax question should be based on calculations
Graham presents the different kind of bonds available on those days but you will now need to research for the current options yourself
Beware of call provisions in callable bonds
Preferred stocks are inherently a bad form of investment since he is paid after the common stocks
Other options: treasury securities, savings bonds, mortgage securities, annuities
Chapter 5: defensive investor and common stocks
Reasons why stocks are good investment- protection against erosion caused by inflation and the higher average return
Diversification 10–30
Each company found be large and prominent, conservatively financed
Max price 25 times the earnings
Exclude growth stocks
Familiarity is complacency
Chapter 6: portfolio for the enterprising investor (negative approach or what to avoid)
Pretty great variety of options depending on interest and expertise
Can start like a defensive investor
Junk bonds might be junk, am option but not obligation
Second grade and preferred stocks are scary too
Foreign government bonds are there, but have their own perils
Beware of trading costs
New common stocks offerings: can be new shares of existing companies or newly IPOed companies.
Quick way to judge the end of a bull cycle: new and obscure companies that IPO have their offerings be greater than medium sized companies with a long history
Chapter 7: portfolio policy for enterprising investor (positive or things to do)
Buying in low market selling in high, growth stocks, bargain issues of various types, buying into special situations
Simple formulas like pick 15–20 top performing companies from about 100 doesn’t work. High performing companies are usually highly priced. Secondly his judgement on their performance in future might be wrong.
Basic principles: must be rationally sound and not the policy followed by most investors
Relatively unpopular large company
Purchase of bargain issues: currently disappointing results or unpopularity
Complicated special situations like some good company in a lawsuit, breakup of companies
Market timing however is still a practical impossibility
Chapter 8: the investor and market fluctuations
Intelligent investors try to time the market do as to not buy if the price is going to be lower and not sell if the prices are going to be higher
Average investor cannot forecast. As well the general public, they’re absolutely terrible at it.
Each stuck you own will advance 50% from it’s lowest value and will reduce by a third from it’s just regardless of the stock. A serious investor is not likely to believe that day to day fluctuations will make them richer or poorer
Stock market often how’s wrong about companies and their value
Businesses change over time and be mindful of how the businesses you’ve invested in change
Intelligent investors don’t always wait till the bear market to buy, since it someone leads to loss if income. You buy if you have money unless the market is priced much higher than it should be.
Never but immediately after a substantial rise or sell after a fall
Control the controllable: your brokerage costs, ownership costs, expectations, risk and tax bill and your behavior
Chapter 9: investing in investment funds
Investment funds: where people pool in money, a fund manger overseas the actual investments, you retain the shares.
Examples include mutual funds, ETFs etc
Open funds: those that you can redeem at net asset value; closed end are not redeemable
Performance funds, beware of them
For your mutual funds check whether the fund managers own the same funds and the amount they do. They should be incentivized to treat it like their own money.
The best fund managers are those who act like they don’t want your money
When you should sell? Expenses go up, unexpected changes in strategy, style of investing changes, tax bills, erratic returns
Chapter 10: investor and their advisers
Be careful who you take advice from, a lot of people buy stocks on advice. You should either completely trust them or listen to only non conventional wisdom until you also become and expert
Security analyses might be helpful provided you ask the right questions
Take recommendations and ask for details but make your own judgement