Sunday, April 30, 2006

Book Review: Intelligent Investor

This book is a jewel. However you need an eye for it. The book describes a unique approach to investing , surprisingly simple, sound yet unpopular. It also gives you reason why such an approach will not be popular. As for soundness of this approach just go to the appendices and read the article by Warren Buffet "Super-investors of Graham-Doddsville" .He has given an impressive list of people, disciples of Graham, all managing billions of dollars and earning consistent returns as high as 20%-30% for 20 years. The common thread among them is value investment philosophy, described elaborately in the Intelligent Investor. The book demarcates the line between investment and speculation. Graham describes how a stock of a sound company can become speculative at very high price and also, how a stock of relatively unpopular and average performing company can become a solid investment at low price. Graham describes 'Margin of Safety' as basic tenet of investing. With sheer force of knowledge and experience Graham dispels widespread myths (like you need to take high risk for high gains..) about stock valuations and gives a simple, effective approach, which can be used to generate satisfactory returns by an average investor. Graham's wit makes the book interesting despite seriousness of subject. “Buy stocks as you buy your grocery not as you buy perfumes" says he. People may ask how relevant the book is at present time? Well, sound strategies are timeless. If you go by the philosophy of value investing than you can apply this approach with minimum modifications even now 20 years later. If your doubts persist then check October 99 issue of fortune where Warren Buffet , legendary disciple of Graham, warned is clear words about high valuation prevailing at that time. People ignored the warning of 'the fogy old prof', at their own peril. New year chopped of 35% of NASDAQ. The highflying internet stocks lost as much as 90%. Still you may not like it. Value investing is not popular. Warren Buffet says, either you get hooked to it or you don't. There is no middle ground. Still you would benefit by reading this book in innumerable ways .At least you won't call yourself investors as you go on speculating.

Posted : Oct 30, 2000

No comments: