Notes from Benjamin Graham's The Intelligent Investor
Aug 30, 2004, 12:26a
This is a summary of notes and quotes from Ben Graham's Intelligent Investor. I think these are only from the first 50 pages or so, since I got tired of taking these notes. I read the book several months ago, and I figured I should just post these notes now since I'm unlikely to make more progress on them.
* Buffet's advice: "What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework."
* The intelligent investor is a realist who sells to optimists and buys from pessimists
* One should not buy because a stock or the market has gone up and one should not sell because it has declined
* Enthusiasm on Wall Street almost invariably leads to disaster, though it may be required for great accomplishments elsewhere
* Limit yourself to issues selling not far above their tangible-asset value. Tangible assets include a company's physical property (like real estate, factories, equipment, and inventories) as well as its financial balances (such as cash, short-term investments, and accounts receivable). Among the elements not included in tangible assets are brands, copyrights, patents, franchises, goodwill, and trademarks. Tangible asset value can be calculated using the balance sheets in a company's annual and quarterly reports; from total shareholder's equity, subtract all "soft" assets such as goodwill, trademarks, and other intangibles. Divide the fully diluted number of shares outstanding to arrive at book value per share.
* Defensive investor stock-bond balance: Never hold less than 25% or more than 75% of your investment in bonds. The same goes for stocks. The simplest choice is to maintain a 50-50 proportion between the two, with adjustments to restore the equality when market developments have disturbed it by as much as 5%. You may choose to hold 25% in stocks if you feel the market is dangerously high, or 75% if you thought that the market was a bargain.
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