The Intelligent Investor by Benjamin Graham is one of the top investing books out there. It has the basis of Warren Buffett's investing style and still provides enormous value even if the last edition was written back in 1971. To modernize the learning experience I have made a chapter by chapter video and podcast summary of the book.

The Intelligent Investor by Benjamin Graham Book Summary!

The Intelligent Investor by Benjamin Graham is probably the best book out there for long term value investors.

However, the last issue is from the 1970s so I will go through the book in a series of podcasts in order to extract what is still relevant. Believe me there is plenty of it relevant, especially in this stock market. This will allow us to compare the current market with essential value investing wisdom and perhaps improve our risk reward perspective on things. Let’s start with chapter 1; Investment versus speculation: Results to be expected by the Intelligent Investor. This chapter discusses the appropriate portfolio policy for the individual investor, an everlasting topic.

Chapter 1 – distinction between investor and speculator
“An investment operation is one in which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” 
The key to Graham, as later with Buffett and Klarman is safety of principal which is the leading rule with value investors, never lose money.

As now, so in the 1970 the was a big misunderstanding of who is an investor and who a speculator. Graham wouldn’t be happy when he would hear the notion of “investing in cryptocurrencies”. Therefor, if you are an investor you invest in the business and take little risk, everything else is speculations. In this market, it means that 98% of all assets are speculations. After the next crash, the stock market will again be called a casino and all things related as speculations, even if now everything seems an investment. As long as it goes up, it is. Same things were going on towards the end of the 1940s when stocks were considered a gamble, thus cheap and in the 1960s when the entire stock buying public called themselves investors.

Modern Value Investing with Sven Carlin

THE INTELLIGENT INVESTOR - BENJAMIN GRAHAM - CHAPTER 1

In this video, we discuss how inflation affects stocks and how an investor should be protected or no. Link to book: https://amzn.to/2K733CR

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INVESTING & INFLATION - THE INTELLIGENT INVESTOR - CHAPTER 2

We continue with our discussion on the Intelligent Investor to apply the everlasting knowledge to the current market in order to avoid doing stupid things and take advantage of others’ stupid actions. Graham’s data go up to 1971 but so we will first look at his and later discuss the insight on the current situation.

The main points Graham emphasizes where we can learn much from history are:

the VARYING relationship between stock prices and their earnings and dividends
It is important to understand the manner in which stocks have made their underlying advance through the MANY cycles of the past century 
Look at successive TEN-year averages of earnings, dividends and stock prices

Graham’s take

From 1871 to 1971 there have been 19 bear markets where stocks fell from 15% to 86% from top to bottom. Yes, 86% is the correct number and it was even 89% of the S&P 500 in the 1929-1932 period. Many forget that the 1920s were one of the best periods in history based on consumerism etc. Rings a bell? However, that is a story for another day. Let’s look at how Graham describes what had been going on.

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150 YEARS OF STOCK MARKET HISTORY - THE INTELLIGENT INVESTOR - CHAPTER 3

The Intelligent Investor – Chapter 4 – General Portfolio Policy: The Defensive Investor
As crazy as it sounds, one should not have everything in stocks.
Perhaps the best counter option are short-term bonds now.
We discuss Graham’s take and apply a contemporary perspective on it. 

Graham clearly differentiates between aggressive and defensive investors where an aggressive investor spends a lot of time on research while a defensive one enjoys life. No matter where you are aggressive or defensive this chapter is crucial for this environment as being defensive might be the most aggressive thing one can do. Let’s see what Graham had to say about the stock and bond allocation and whether it still applies to this environment.

Opposite view on risk:
The common view on risk is that low risk equals low returns but Graham, like me, sees things from a different perspective. For him a well-researched bargain is much less risky than a bond because bonds lose a lot if interest rates increase and if there is inflation, thus those are also risky.

The basic problem of bond stock allocation:
Graham’s view for the defensive investor is to have an allocation between bonds and stocks between 25% and 75%. When stocks are cheap one should have 75% in stocks and vice versa. This is against human nature and we have seen that in 2017, after an 8-year bull market, stock market inflows were the highest. However, this human trait of buying high is exactly the reason why one should do the opposite and buy low when others are selling low. 

Another problem is that the stock-bond allocation is personal and here is where the problems start. If you would have been just 25% in stocks for the past 3 years you would have missed out on the 25% run the S&P 500 has had since while your returns would be around zero given the returns on bonds and their recent decline.

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Full-time independent stock market analyst and researcher!
STOCK MARKET RESEARCH PLATFORM (analysis, stocks to buy, model portfolio)

I am also a book author:
Modern Value Investing book:
amzn.to/2lvfH3t

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THE INTELLIGENT INVESTOR - FULL BOOK SUMMARY - CHAPTER 4

THE DEFENSIVE INVESTOR - THE INTELLIGENT INVESTOR - CHAPTER 4

The Intelligent Investor – Chapter 5 – The defensive investor and common stocks.

We all like common stocks but in this part of the economic cycle we should also be defensive and therefore it is a perfect time to discuss Chapter 5 of Benjamin Graham’s book The Intelligent Investor – The defensive investor and common stocks. 
The topics discussed are:
- Four rules to follow when buying stocks
- Growth stocks
- Dollar cost averaging
- Investor’s personal situation

The defensive investor and common stocks:
Graham discusses how in 1949 stocks were considered highly speculative but how towards the end of the 1960s, stocks were considered a must have. The situation isn’t much different now, stocks are considered the best investment out there while in 1982 stocks were considered risky, highly speculative and not something to own. This is typical for how humans go about stocks, don’t forget that in your life there will be at least two such market cycles. The main point is that stocks are sometimes extremely cheap and sometimes extremely expensive and the key is to properly allocate your portfolio funds in relation to the risk and reward. So, yes, stocks have and will probably deliver inflation protection and higher returns over the long term but these benefits, to quote Graham: “could be lost by the stock buyer if he pays too high a price for his shares”.

This was the case from 1929 when it took 25 years for stocks to regain lost territory and let’s hope it will not be another historical case from 2018 even if valuations and debt looks similar. Of course, reinvesting dividend changes things but now there isn’t much to reinvest.
Graham had no enthusiasm for common stocks in late 1971 due to the high valuations.

Want to know more about what I do? 
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Full-time independent stock market analyst and researcher!
STOCK MARKET RESEARCH PLATFORM (analysis, stocks to buy, model portfolio)

I am also a book author:
Modern Value Investing book:
amzn.to/2lvfH3t

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COMMON STOCKS - THE INTELLIGENT INVESTOR BOOK SUMMARY - CHAPTER 5

Chapter 6 of The Intelligent Investor discusses:
Junk bonds
Foreign bonds
New stock issues - IPOs
Second grade bonds – Junk bonds
This is not really a contemporary subject but one to keep in mind for when bond opportunities arise. Graham discusses how sometimes second grade bonds, or what we would now call high yield or junk bonds trade at extreme discounts to their maturity value due to changes in interest rates and due to the change in the perception of risk. The junk bond yield has significantly increased over the past few months but is still far from opportunity territory as it was the case in 2016, 2011 and especially 2009.

Want to know more about what I do? 
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Full-time independent stock market analyst and researcher!
STOCK MARKET RESEARCH PLATFORM (analysis, stocks to buy, model portfolio)

I am also a book author:
Modern Value Investing book:
amzn.to/2lvfH3t

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BONDS AND IPOs - THE INTELLIGENT INVESTOR - CHAPTER 6

The Intelligent Investor – where to find opportunities
I continue with my contemporary summary of Benjamin Graham’s book The Intelligent Investor as I believe that the combination of the everlasting wisdom in the book and a modern approach is all what an investor needs to reach great returns, the best financial education at this point in time.

 Today’s discussion is about Chapter 7 – Portfolio Policy for the Enterprising Investor: The Positive Side. 
Today we turn from discussing how a defensive investor should invest to discussing how an enterprising investor should invest, one that devotes a fair amount of time in order to beat the market.

There are 4 things an enterprising investor has to focus on:
- Buying low and selling high
- Growth stocks
- Bargains
- Special situations

We will discuss the buying low and selling high strategy when summarizing the next chapter, chapter 8 that is alongside chapter 20 what every investor should read according to Buffet. Let’s see what Graham has to say about growth stocks.

Growth stocks
A growth stock is defined as one that has grown better than the average and will continue to do so. We would all like to have invested in Netflix a few years ago or to find the next Netflix to invest in.

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Full-time independent stock market analyst and researcher!
STOCK MARKET RESEARCH PLATFORM (analysis, stocks to buy, model portfolio)

I am also a book author:
Modern Value Investing book:
amzn.to/2lvfH3t

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THE INTELLIGENT INVESTOR - BOOK SUMMARY - CHAPTER 7

Graham’s message is simple:
Take advantage of low price levels and high price levels
Buy when you have money but be careful what you buy
Don’t worry about market fluctuations as you can’t influence those
Avoid buying when market has extremely high valuations, look for special situations then
Never buy or sell something due to market moves
Find good management running the business
Be a business owner

If you can follow the above, you have nothing to worry!

Want to know more about what I do? 
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Full-time independent stock market analyst and researcher!
STOCK MARKET RESEARCH PLATFORM (analysis, stocks to buy, model portfolio)

I am also a book author:
Modern Value Investing book:
amzn.to/2lvfH3t

More at the Sven Carlin blog: 
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STOCK MARKET FLUCTUATIONS - THE INTELLIGENT INVESTOR BOOK - CHAPTER 8

I am not usually saying that index funds are bad but simply that the risk at current levels is too high for the returns and the lower yielding Treasury is better from a risk reward perspective than an index funds. I think Graham would agree as stocks were extremely expensive for him in 1971 where we can see above the price to earnings ratio was close to 19.

Want to know more about what I do? 
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Full-time independent stock market analyst and researcher!
STOCK MARKET RESEARCH PLATFORM (analysis, stocks to buy, model portfolio)

I am also a book author:
Modern Value Investing book:
amzn.to/2lvfH3t

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INVESTMENT FUNDS - THE INTELLIGENT INVESTOR - CHAPTER 9

Ben Graham would be against investing in bonds now, at least for the long term.

Want to know more about what I do? 
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Full-time independent stock market analyst and researcher!
STOCK MARKET RESEARCH PLATFORM (analysis, stocks to buy, model portfolio)

I am also a book author:
Modern Value Investing book:
https://amzn.to/2lvfH3t

More at the Sven Carlin blog: 
https://svencarlin.com/

Check out Modern Value Investing YouTube:
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HOW TO ANALYZE BONDS - THE INTELLIGENT INVESTOR - CHAPTER 11

I continue with summarizing Graham’s book The Intelligent Investor and today we touch on a very delicate subject: The Investor and His Advisors. As I offer stock market research services you can put me into both the investor and advisors group. Let’s first see what Graham has to say and then discuss the current environment. 

Seeking investment advice
Differentiate between stock market forecasts and business forecasts
Advice from brokerage houses
Graham on investment bankers

As Graham is in favor of investing in businesses he considers seeking investing advice as naïve. Relying on other people to make investment profits for you is not always the best thing to do. There are two different investment advices you can get: one is there to protect you from doing stupid things while you might also seek advice that will give you better than average investment returns. 
Graham’s message is simple: you either let somebody else manage your funds and seek a conservative return or you understand the implications behind more complex investment strategies that might lead to higher returns.

Differentiate between stock market forecasts and business forecasts
As there is plenty of demand for what people think the market is going to do, there is plenty of supply for that but according to Graham there is absolutely no value there as market forecasters are right or wrong merely thanks to luck. Where there is value is business forecasts which are a completely different ball game. 
When you know the business and apply Graham’s principle that the price what you pay in relation to the business you buy is the key factor, then business analyses add value. 

Advice from brokerage houses:
I think nothing has changed there since Graham’s time where I quote: “Most stock-exchange houses still adhere to the old-time slogans that they are in business to make commissions and give the customer what they want.” 

I also see that the current financial environment is geared so much towards trading where such houses keep making their commissions. Even if the average commission is much lower today, the number of trades is much, much higher than it was and you can trade a stock 10 times in a day if you want.

Graham’s take on the matter is that you have to seek value minded and not quotation-minded analysts to help you. If you focus on the former, you will do much better in your financial life.

Graham on investment bankers:
Graham takes is simple: investment bankers are needed to create a stock market but when their customers are greedy they also offer what the customer demands. An example of such imprudent advice are 1999 IPOs, 2006 CDOs etc. So, always keep an open eye with such vehicles. 

Conclusion:
My main wish is that everybody takes responsibility for one’s own financial life and a great way to do that is to read Graham’s book. If one does not have time, today it is easy and cheap to be a defensive investor where one simply rebalances between risk free bonds and stocks depending on their earnings yield. 
Those who have more time will educate themselves about investing and seek advice form others not in the form of what to do but in the form of research, analysis and a value, business oriented opinion.
Remember, nobody knows whether a stock will go up or down, but there are people who can properly analyze a business. In the long term, business analysis is all what you need.

Want to know more about what I do? 
https://goo.gl/MQG2k5

Full-time independent stock market analyst and researcher!
STOCK MARKET RESEARCH PLATFORM (analysis, stocks to buy, model portfolio)

I am also a book author:
Modern Value Investing book:
https://amzn.to/2lvfH3t

More at the Sven Carlin blog: 
https://svencarlin.com/

Check out Modern Value Investing YouTube:
https://www.youtube.com/c/InvestwithSvenCarlinPhD

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INVESTMENT ADVICE - THE INTELLIGENT INVESTOR - CHAPTER 10

HOW TO ANALYZE STOCKS - THE INTELLIGENT INVESTOR - CHAPTER 11

Topics covered: 
Valuations
Long term prospects
Management
Financial strength and capital structure
Dividend record
Current dividend rate
Capitalization rate for growth stocks (formula)
Industry analysis
Two part appraisal process

HOW TO ANALYZE STOCKS - THE INTELLIGENT INVESTOR - CHAPTER 11

Want to learn about stock market investing, understand risk and reward of the stocks you buy, learn how to do in-depth fundamental analysis and more? Modern Value Investing with Sven Carlin Podcast covers a variety of investing topics that will help you reach your financial goals.