The Intelligent Investor

I don't believe anyone can dispute that Benjamin Graham was one of the most successful and knowledgeable investors of his time. Although Graham died in 1976, many, if not all, of his books are still in publication. His book, "The Intelligent Investor" was recently revised and re-issued in 2006. This edition includes the original text as written by Graham, and then each chapter includes a "comments" section to attempt and compare the original text to the current investment world.

Warren Buffet endorses this books as: "By far the best book on investing ever written". Rolandovich seconds that endorsement.

Of particular interest is Graham's philosophy that most investors should split their portfolios 50-50 between stocks and bonds.

"We are thus led to put forward for most of our readers what may appear to be an oversimplified 50-50 formula. Under this plan the guiding rule is to maintain as nearly as practicable an equal division between bond and stock holdings." (pg. 90).

In today's investment climate and constant marketing to investors by the brokerage houses, Graham's approach may appear overly conservative. But is it? Perhaps Graham's philosophy is worth heading.

Graham makes the ever important distinction between "investing" and "speculating".

He defines investing as:

"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return." (pg. 35).

This sentence is further broken down as follows:

"thorough analysis" means "the study of the facts in the light of established standards of safety and value".

"safety of principal" signifies "protection against loss under all normal or reasonably likely conditions or variations"

and "adequate" return refers to "any rate or amount of return, however low, which the investor is willing to accept, provided he acts with reasonable intelligence."

Let us all strive to become investors and not gamblers or speculators with our money.