Lessons from Ben Graham’s “The Intelligent Investor”

I read the 2006 version of The Intelligent Investor. It consists of the 1973 version by Ben Graham with commentary from Jason Zweig. I expected a dry, boring read, but found the majority of it entertaining and breezed through it quickly.

Though it’s an investing book, Graham places a lot of emphasis on psychology and temperament. A great investing strategy won’t succeed in practice if the investor doesn’t have the right temperament.

Graham distinguishes between Defensive Investors — investors who are passive and will be satisfied earning the average market return — and Enterprising Investors — who are willing to put in the work to try to beat the market. Graham believed most people are not temperamentally suited to be Enterprising Investors and recommended the vast majority of us be Defensive.

Graham shares a great deal of wisdom that is applicable to both styles of investing. I’m going to share a few of my favorite insights first, then distill the key points of Graham’s (and Zweig’s) tactical advice for the two types of investors.

General Wisdom

• Base decisions on the value of the underlying business. When you’re buying shares — ask yourself if you’d be willing to buy the whole company for the valuation implied by that share price. Graham’s approach is built on analyzing businesses and not analyzing securities or trying to time the market.
• Markets are fickle and market prices are largely…