The Intelligent Investor by Benjamin Graham

As part of Health class and Consumer Ed, I (and my classmates) made an Investopedia account and participated in a group stock investment game. After making some poor decisions (dropping my net worth down to 930k from 1m), I made a new account with a bit more success (1.05m from 1m). However, I felt the urge to learn more about the art of investing itself, which is why I chose The Intelligent Investor by Benjamin Graham, a book considered a classic in the investing world. 

Benjamin Graham is also known as the "father of value investing." This book focuses on the long-term and risk-averse approach to investing and focuses on research and factual data instead of predictions and speculations (which I had been doing). I picked up this book with the idea that it might help me improve in another area of investing, and it did not let me down. 

The first thing he states is, simply put, the reasons people lose money: buying into the hype of bull markets, not doing your own research, relying on non-credible sources, and not staying humble when your stocks are doing well. Obviously, one should try to avoid these methods. I reflected on myself boasting my impressive gains after going all in on a good day on a cheap stock that I found online and praying that it would go up. 4/4 rules broken so far. 

Then, he explains "defensive investing," a method where an investor makes less profit, but with a low risk of losing money. He states that 25% of the investor's money should be in bonds, with the remaining 75% in stocks. He includes some methods of analyzing if a company is worth buying in this portfolio; for example, he asserts that the PE ratio x PB ratio should not be more than 22.5.  

On the other hand, for "enterprise investors," or people who are willing to put in more time and effort into research and are aiming for higher profits with slightly more risk, he also lists some key points, such as a stock having a dividend and not being in too much debt. 

He also emphasizes the importance of avoiding day trading, since it is very risky.

Overall, I think this was a great book and would definitely recommend it to others, especially people with an interest in investing like me. Truthfully, this will not benefit my Investopedia portfolio too much, since it is a timed contest, but in scenarios where I want to safely outperform inflation, I think that this book could serve as a reliable manual. This was a great read and I will probably return for the next blog with a more technical analysis-based approach to investing. Thank you for reading and have a nice day!

-Jay