Benjamin Graham’s objective was to provide an investment policy book for the ordinary investor. He succeeded in putting seemingly hard concepts into terms that could be understood and, more importantly, implemented by the average investor.
The Intelligent Investor, by Benjamin Graham, is probably the most important and influential value investing book ever written. Warren Buffet described it as “by far the best book ever written on investing”.
One of the most important and basic rules is to keep the activities of investment and speculation totally separate. Intelligent investing involves: 1) analysis of the fundamental soundness of a business 2) a calculated plan to prevent a severe loss and 3) the pursuit of a reasonable return. Speculation involves basing decisions on the market price, hoping that someone will pay more than you at a later date.
...The Enterprising Investor has the time and experience (or proper guidance) in investing to expand the possible universe of opportunities beyond conservative investments. It is an active approach that requires constant attention and monitoring.
...In investment selection, it is most accurate to be able to make judgments based on past performance. The greater the amount of assumptions that have to be made about the future, the greater the possibility of misjudgment or error. Graham is adamant about not putting any importance in short term earnings. The more an analyst relies on short term results, the greater the risk, and the more due diligence that is required.
...Graham urged shareholders to take an active role in being owners of the company. He thought management with good results should be rewarded, and management with poor results should be questioned and challenged.
He was particularly adamant about shareholders demanding a fair portion of their earnings returned in dividends. This is because much of the time companies squander past earnings. Just because management does a good job with current operations doesn’t mean they know the best use of excess company capital.
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As founder of the Arbor Investment Planner my passion is to educate and empower the individual investors to manage their own investment portfolio.
The Arbor Investment Planner is a value investment portfolio management guide for those individual investors who choose to manage their own money. I focus on ideas and concepts important to the self directed investor; but put special emphasis on risk management, value investing strategies, and proper asset allocation and diversification.
- Ken Faulkenberry
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