The Little Book of Common Sense Investing

Intelligent Investing

Benjamin Graham's Intelligent Investor was published in 1949. He was considered his era's most astute money manager, and his book is a classic of sound investment advice. He points out that most investors do not have the professional training, expertise, or time to analyze the worth of companies and the value of their current stock offerings. Nor do they have the ability to predict what a company's stock value will be at some future point in time. He therefore advised his readers to be consistently conservative in their stock choices. He advised investing in a "defensive portfolio," an overly broad selection of diversified stocks which, once purchased should be held on to for the long term.

Graham warned investors against relying too heavily on brokers who make their money through trading commissions. He pointed out that such brokers' short-term financial interests clearly conflicted with their clients' long-term investment goals. Graham further explained that, mathematically, the odds never favor the individual broker or investor. While Graham wrote positively about mutual funds, he pointed out that from 1937 to 1947, the typical mutual fund ...