The Intelligent Investor: Chapter 1

By ValueWalk

May 21, 2016

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By Jacob Wolinsky. Originally published at ValueWalk.

The Intelligent Investor: Chapter 1

Published on May 21, 2016

0:02in the first chapter of the intelligent investor will talk about three different

0:06learning objectives the first one what is the Intelligent Investor all about

0:11staying in one investment versus population and the third one passive

0:16investor vs accident lester but let’s take a look at the first one so what is

0:21the Intelligent Investor all about well until you investors have booked their

0:26sold more than one million copies and is considered the most important book ever

0:30written in value investing original published in 1949 the author of the

0:35Intelligent Investor is Benjamin Graham Warren Buffett’s or professor at

0:40Columbia University the world’s richest investor Warren Buffett has said this

0:44multiple times about the book

0:47well let’s see what he’s actually saying I guess I’m lucky days in my life but

0:51one of the luckiest was in 1949 when I was 19 years old and like Nebraska I

0:58picked up a copy of the Intelligent Investor but not only changed by

1:03investment philosophy it changed my whole life I would be a different person

1:09at a different place if I hadn’t foreseen that book I got a bedrock of

1:15investment philosophy is really hasn’t changed ever since I read the book I’m a

1:21embellish on a little here and there but it was Ben’s idea that somebody down the

1:26right right path because for Buffett himself the book provided him with an

1:33investment philosophy that hasn’t changed even though he talks about how

1:37his bill on it I think he captures the essence of the Intelligent Investor

1:41everyone that’s new to investing should read this book and make it the

1:46foundation for their investment philosophy and he said that I think it’s

1:51best for new investors to find their own path but I like to stress that numerous

1:55successful investors including icon ambulance last has used the Intelligent

2:01Investor ask the framework a framework that never changes in this media serious

2:07I’ll go through the highlights of each other twenty chapters one at the time

2:11but let’s start

2:14but the two additional very addictive so we have here in 2001 the first one was

2:18investment speculation the intelligent investor is written with investors in

2:24mind as opposed to speculators and your first task is to distinguish between the

2:29two

2:30ever Grand things that many people confuse the investor with a speculator

2:35and also says that really depends on the time period we are in so allow me to

2:40leverage this the first time grim make the distinction between investment and

2:46speculation was in 1934 after the Great Depression back then everyone was very

2:52skeptical about investing in stocks and bonds and people started to Colima

2:56cautious investors regulators later with Mr conditions improve his soul that even

3:02reckless speculation suddenly started to become investing but what’s the real

3:06difference here

3:08well when you mean ground coming up this definition promoting the safety of the

3:13principal and return that investing and what this means is that before you can

3:20even stop to talk about investment you need to think about not losing money you

3:25should have a very limited risk of losing any of your principal before you

3:29even start considering but returns you can achieve what does this mean that

3:34there is no risk and you can’t lucien money if you invest like insulation

3:38master sadly no Graham action is says that there is no investment without a

3:45minor ailments elation since you can’t predict the future

3:49ever grand provided you with the tools in this book to protect your principal

3:54and also shows you at the same time how you can draw your capital if you do your

3:59homework he has one where caution though he says that no matter what stuck your

4:04pic if you use debt or invest in with money he can’t afford to lose that will

4:09always be pure speculation in the original book actually cause the passive

4:15investor for defensive and the active investor for aggressive or the

4:20enterprising investor so if you read the original book please don’t be confused

4:25about my choice of words I’ll just go ahead and use that room that you would

4:28use today basically Intelligent Investor talks about two different investment

4:33approaches and it’s not like one stretches fear than the other and I do

4:38want to stress one thing at active investor is not the same as a speculator

4:43so you actually have two different approaches here but which approaches you

4:48choose really depends on your personality and how much time you will

4:52spend it’s important that you choose one or the other and hopefully this course

4:57conchita what’s right for you so let’s meet the main characters of the book

5:02passive and the active investor in my example I’ve chosen to call the pass

5:07investor for lender typically has the addictive of getting close to my return

5:12and other justice important feature is that she wants the freedom of bother as

5:18Benjamin Graham express it in the insides investor so basically Linda

5:23wants to come pound her capital but it doesn’t want to spend hours researching

5:28what stocks and bonds to buy so basically she does two different things

5:32she uses what is called a dollar-cost averaging approach and with this

5:38basically means is that if she concludes assets a $500 a month and that is what

5:43you she will invest well she doesn’t spend the time to figure out if the

5:46stock market is high or low she won’t see if he can time it or trade

5:51individual stocks but basically just buy securities with the same amount every

5:55month this is because Linda knows that on average

6:00well she will buy an average she both buys into stocks and bonds and we’ll see

6:05later in Chapter four and five which type of stocks and bonds growth things

6:09that suit investment style but for now just think of Linda as an individual was

6:15satisfied with my return and want to spend her time on the hobbies and not

6:19answer organizing individual stocks advanced is important for me to stress

6:24that this is actually the approach the passive approach their Warren Buffett

6:29suggest for the vast majority of investors now this might cause your

6:34shoes is enacted invested myself

6:37by you saying that you need to spend so much time to really understand the stock

6:41market if you want to be an active investor so you don’t want dedicate time

6:46you’re probably better off saying that I’m getting really decent man returns in

6:51the stock market now let’s talk about the person who grand calls the

6:56aggressive investor or who I like to call an active investor let’s just call

7:02him john john wants a higher than average might return and since he also

7:07likes investing well contrary to linda he doesn’t mind putting in the hours so

7:12he does things a little different he doesn’t buy the same amount every month

7:16like Linda John makes an independent valuation all his securities and only

7:21buys when he likes the price he buys high ridge securities that is the same

7:27as Linda by the also buys low ridge churches for instance numerous stock to

7:33the shorter track record