The Intelligent Investor

Book Review: Is The Intelligent Investor Still Relevant Today?

Benjamin Graham’s “The Intelligent Investor,” first published in 1949 and revised multiple times (most notably in 1973), has guided countless investors through market highs and devastating lows. It’s the book Warren Buffett credits as “the best book about investing ever written,” and the one that fundamentally shaped his investment philosophy on his journey to becoming one of the richest people in the world.

But is a book published decades ago still relevant in today’s fast-paced market? This review examines the key principles of Graham’s investment philosophy, evaluates their applicability in contemporary financial markets, and considers the book’s relevance for modern investors navigating an increasingly complex financial market.


Affiliate

Stock Rover is an award winning investment research platform.

  • The site has 8,500+ stocks, 4,000 ETFs, and 40,000 mutual funds.
  • Access to 650+ metrics, financial data, market news, stock and fund ratings, fair value, margin of safety, etc.
  • Includes brokerage integration, portfolio tracking, rebalancing, watchlists, alerts, future income forecasts, etc.

Click here to try Stock Rover for free (14-day free trial).


About Benjamin Graham

Benjamin Graham’s investment philosophy was primarily shaped by his experiences during the 1929 market crash and subsequent Great Depression. As both a successful investor who managed significant investment funds and an academic who taught at Columbia Business School, Graham developed an approach that combined a thoroughly researched framework with practical application. His mentorship of notable investors, including Warren Buffett, further cemented his influence on investment theory and practice throughout the twentieth century and beyond.

Key Principles and Investment Categorization

The Intelligent Investor distinguishes between two types of investors: the defensive or passive investor and the enterprising or active investor. This distinction recognizes that not everyone has the time, personality, or talent to actively pick individual stocks.

For defensive investors, Graham recommends a simple portfolio of high-quality bonds and blue-chip stocks, with periodic rebalancing to maintain the target allocation that aligns with an investment strategy. He recommends a 50/50 stock to bond split. This conservative approach of investing in premium bonds and established equities is similar to that taken by index fund investors, which isn’t surprising since Graham’s defensive strategy essentially predicted the surge in passive investing decades before index funds existed.

For ambitious investors willing to put in the work, Graham outlines methods for finding undervalued securities through fundamental analysis. His approach isn’t about identifying popular or trending stocks, but finding solid companies trading below their intrinsic value, which he refers to as the “margin of safety.”

The Concept of Mr. Market

A memorable concept in the book is Graham’s example of Mr. Market. He asks readers to imagine that they own a small share of a business, and every day, a partner named Mr. Market comes along and offers either to buy your share or sell you his.

The catch is that Mr. Market is emotionally unstable. Some days he’s happy and offers ridiculously high prices. Other days he’s depressed and willing to sell at extremely low prices. Graham teaches readers that the intelligent investor’s job isn’t to follow Mr. Market’s mood swings. Instead, investors should take advantage of them by buying when prices are unreasonably low and selling when they’re unreasonably high.

This metaphor illustrates an unreasonable but often popular market psychology and teaches investors to view market fluctuations as opportunities rather than threats. In today’s world of being inundated with financial news and social media hype, the lesson of Mr. Market may be more valuable than ever.

Value Investment Methodology

The central thesis of Graham’s approach revolves around value investing. He instructs readers to evaluate companies based on quantifiable metrics including assets, earnings capacity, dividend history, and financial stability. Some of Graham’s specific metrics, such as buying stocks trading below two-thirds of their net current asset value, may be difficult to apply in today’s market. But the fundamental principle that price matters, and paying too much for even the best company can result in poor returns, remains true.

Graham’s emphasis on maintaining a “margin of safety,” purchasing securities only when a substantial gap exists between market price and calculated intrinsic value, provides protection against analytical errors and unexpected market downturns. This principle endures as a key component of Graham’s methodology.

Investment Versus Speculation

Graham draws a sharp distinction between investing and speculation. By his definition, investment comprises thorough analysis with reasonable expectations of capital preservation and adequate returns, while speculation lacks this type of analysis and safety margin.

The book doesn’t condemn speculation outright but warns that most people who think they’re investing are actually speculating. Graham’s advice is simply to understand the difference and never commit more than a small portion of your capital to speculative ventures.

Considering the rise of commission-free trading apps, cryptocurrency speculation, and social-media driven investing, Graham’s warnings about speculation appear consistent with the potential pitfalls investors face today.

Is “The Intelligent Investor” Still Worth Reading Today?

While some specific metrics and examples may feel dated, the core principles of Graham’s philosophy have stood the test of time. Value investing has weathered numerous market cycles and continues to provide a solid foundation for long-term investment success.

A reader on the reddit forum subreddit r/valueinvesting agreed:  

“It’s outdated but I just read it for the first time and was very engaged throughout. Got me into reading Buffet and then other more modern stuff. It’s a good read for a newb as the technical aspects (of which there is little anyway) are outweighed by his emotional lessons, which were invaluable. He encapsulated why I’d been letting my emotions and typical herd/market behavior dominate my portfolio in a losing direction.”

Readers should approach the book with awareness of how markets have evolved. Corporate accounting standards have improved and information is more readily available. As well, investing in low-cost index funds provides defensive investors with options that weren’t available in Graham’s time. 

As the Reddit poster noted, what makes “The Intelligent Investor” a valuable read is the mindset it cultivates. Graham teaches readers to think independently, resist emotional decision-making, and focus on long-term value rather than short-term price movements. These lessons are truly timeless.

Related Articles on Dividend Power


Here are my recommendations:

Affiliates

  • Simply Investing Report & Analysis Platform or the Course can teach you how to invest in stocks. Try it free for 14 days. 
  • Free Dividend Kings Spreadsheet from Sure Dividend, complete with Buy/Hold/Sell recommendations, dividend histories, and much more. It is an excellent resource for DIY dividend growth investors and retirees.
  • Stock Rover is the leading investment research platform with all the fundamental metrics, screens, and analysis tools you need. Try it free for 14 days.
  • Portfolio Insight is the newest and most complete portfolio management tool with built-in stock screeners. Try it free for 14 days.


Receive a free e-book, “Become a Better Investor: 5 Fundamental Metrics to Know!” Join thousands of other readers !


*This post contains affiliate links meaning that I earn a commission for any purchases that you make at the Affiliates website through these links. This will not incur additional costs for you. Please read my disclosure for more information.

Website |  + posts

Nadia Tahir is a freelance writer and content creator. She mostly writes in the areas of lifestyle and personal finance. She also enjoys writing on her blog about motherhood at This Mom is On Fire.

Leave a Reply

Your email address will not be published. Required fields are marked *