Smart investor. The Complete Guide to Value Investing

This book is the type of literature that should be in the closet of anyone who has a desire to use the stock market to increase their wealth. Over a long period of time (since 1949), Graham's creation has become the best textbook on working with stock markets, which provides the reader with the opportunity to understand various investment methods, the best of which is based on comparing prices and the real value of shares. The book will tell you about the main differences between investing and speculation, explain what a passive or active investor is, and also highlight the features of investment strategies for both. This book is of interest to a fairly large circle of readers, and it can serve as reference material for both beginners and experienced people.

So, what exactly is this book about? A smart investor does not focus on the general financial policy of saving and investing. It concerns exclusively the funds that entrepreneurs are willing to invest in various types of securities (bonds, shares).

The task of Benjamin Graham's work was to help non-professionals model and create investment strategies. It says almost nothing about stock analysis techniques. Central attention is paid to all the principles of monetary investments, as well as the position of investors. It shows a comparison of shares of a number of companies (2 each), whose names are located next to each other on the New York Stock Exchange listing. This shows the most important points that an investor may encounter when choosing various securities.

sets itself a priority goal - to convey to the reader all possible options for the most significant mistakes that he can make in the investment process, as well as to model an investment policy that will be convenient for him.

It is very important to note that this book is intended solely for investors and not for speculators, and one of its main purposes is to identify the differences between them, it is also not intended for those who trade in the stock market. They, for the most part, rely on charts and other mechanical methods to select the right moment for buying and selling shares. The basic principle, characteristic of almost all “technical approaches”, is that you need to buy or sell depending on whether prices are rising or falling. This principle is the opposite of a person's standard understanding of running a business, so following it most likely will not lead to great success.

Benjamin Graham

Smart investor. The Complete Guide to Value Investing

Published with the assistance of the International Financial Holding "FIBO Group, Ltd."

Scientific editor V. Bashkirova

Project Manager O. Ravdanis

Proofreaders E. Aksenova, E. Chudinova

Computer layout A. Abramov

Design V. Molodov

Art Director S. Timonov

The cover design uses an image from the photo bank shutterstock.com

The Intelligent Investor – Revised Edition.

There are also two acknowledgment lines for reprinted material: “The Superinvestors of Graham-and-Doddsville,” by Warren E. Buffett, from the Fall 1984 issue of Hermes, Magazine of Columbia Business School. Reprinted by permission of Hermes, Magazine of Columbia Business School, copyright © 1984 The Trustees of Columbia University and Warren E. Buffett.

“Benjamin Graham,” by Warren E. Buffett, from the November/December 1976 issue of Financial Analyst Journal. Reprinted by permission of Financial Analysts Federation.

Through vicissitudes everything

We strive through all the trials...

Virgil. Aeneid

Jason Zweig

Words of gratitude

I express my heartfelt gratitude to everyone who helped prepare the new edition of Benjamin Graham's book. This is Edwin Tan (HarperCollings), whose support and inexhaustible energy helped bring the project to fruition. These are the magazine staff Money– Robert Safyan, Denis Martin and Eric Gelman, who actively, patiently and unselfishly helped me. This is my wonderful literary agent John Wright and the tireless Tara Kalvarsky from Money. These are Theodore Aronson, Kevin Johnson, Martha Ortiz and other employees of the investment consulting firm Aronson + Johnson + Oritz, who made a number of valuable comments and suggestions. I am also grateful to Peter L. Bernstein Corporation President Peter Bernstein, William Bernstein (Efficient Frontier Advisors), John Bogle (founder of Vanguard Group), Charles Ellis (co-founder of Greenwich Associates), and Lawrence Siegel (Director of Investment Policy Research at the Fond Foundation). I am deeply grateful to Warren Buffett and Nina Munk, as well as the tireless employees of Time Inc. Business Information Research Center; FridsonVision LLC CEO Martin Fridson; President of the Center for Financial Research & Analysis Howard Shilit; editor and publisher Inside Information Robert Veres; Daniel Fuss (Loomis Sayles & Co), Barry Nelson (Advent Capital Management); employees of the Museum of Financial History of the United States; Brian Mattes and Gus Sauter (Vanguard Group); James Seidel (RIA Thomson); Samilla Artamura and Sean McLaughlin (Lipper); Alex Auerbach (Ibbotson Associates); Anette Darson (Morningstar); Jason Bram (Federal Reserve Bank of New York) and one investment fund manager who wishes to remain anonymous.

But most of all I am grateful to my wife and daughters, who suffered for so long because I worked day and night. Without their love and patience I would not have been able to do anything.

Warren Buffett

Preface to the fourth edition

In early 1950, when I was 19 years old, I read the first edition of this book and decided that it was the best thing ever written about investing. Since then my opinion has not changed.

You don't need a super-high IQ, sophisticated business strategies, or inside information to be a successful investor for a lifetime. All you need is the ability to make decisions based on common sense and the ability to control emotions, not allowing them to lead to destructive consequences. This book describes in detail and in an accessible way the correct approach to investing, based on emotional discipline.

If you do business with Graham's principles and follow the helpful advice he gives in chapters 8 and 20 (which is not as easy as it may seem), the results will follow. Can you achieve outstanding success? This will depend on your efforts and intelligence, as well as the fluctuations and vagaries of the stock market that an investor faces throughout his life. The more illogical the market behaves, the better for the intelligent investor. Follow Graham's advice and you'll benefit from the vagaries of the stock market, rather than becoming one of them.

For me, Benjamin Graham is not just the author of this book and the teacher. He influenced my life almost as much as my father. Shortly after his death in 1976, I wrote a few words about him in Financial Analysts Journal. I think that after reading this book you will be able to appreciate Graham's merits that I have noted.

Benjamin Graham (1896–1976)

When Benjamin Graham was about 80 years old, he told one of his friends that he wanted to do something stupid every day, create something new, and be generous.

This original formulation of life's purpose testifies to the amazing ability to express one's thoughts simply and modestly, in a very delicate manner, without moralizing or falling into a mentoring tone.

Those who have read Graham are well aware of how innovative his ideas were. It is not often that students and followers fail to surpass the teacher and author of a new theory. But today, 40 years after the publication of the book that brought a logical and systematic explanation to such a messy and confusing field as investing, it is unlikely that any securities analyst can compare with Graham. In a field where ideas become obsolete within months, Benjamin Graham's principles remain unshakable. Moreover, in times of financial turmoil that sweep away other, shakier logical structures, the value of these principles only grows and becomes even more obvious. Graham's advice always helps those who follow it, and allows even less able investors to outperform their more gifted brethren, who often make mistakes because they follow the instructions of fashionable and popular experts.

Oddly enough, Graham's authority as an investor was not at all the result of a deliberate concentration of mental effort on solving a single problem. Graham was not a narrow professional. Rather, he was a thinker in a broad sense, and his theory was a kind of "by-product" of a powerful intellect - an intellect that no one I knew possessed. He remembered literally everything, was obsessed with a thirst for new knowledge and knew how to use it to solve problems that, at first glance, belonged to completely different areas. Whatever he was talking about, following the flight of his thoughts was a real pleasure.

Graham had one more quality that set him apart from the crowd. I'm talking about generosity. For me he was a teacher, employer and friend. No matter who he had to deal with - students, subordinates, friends - he always behaved absolutely openly, freely shared his thoughts, sparing neither time nor effort for people. Do you want to figure something out? Go to Ben. Need support or advice? Ben will definitely help.

Walter Lippman spoke with admiration of people who plant trees in the shade of which other people will rest. Ben Graham was just such a man.

Benjamin Graham's book is a real “Bible” for all novice investors and not only. It was not for nothing that at one time it drew the attention of a young entrepreneur, who explained that it was this book that changed him and that the author himself influenced him no less than his own father. He still recommends this book to all beginners and considers it the best of its kind. By the way, “The Intelligent Investor” was republished only in the USA 10 times. And this says a lot.

The author of the book is a fairly well-known person not only in the world of economics, but also in investments. He is the founder of the method of investing based on the value of shares.

The main idea of the book is to give the investor a high-quality tool for creating a profitable investment strategy. This system is based on a methodology for comparing market quotes and the real value of securities.

One of the important aspects that is considered in this work is the difference between those who make money on the difference in quotes and those who invest their money in order to receive dividends or gain the opportunity to manage part of the enterprise. In his work, Graham calls for separating concepts such as speculation and investment. The latter includes operations that are based on a thorough analysis, search for prospects and security of invested capital.

The usefulness of this book cannot be underestimated. The publication is replete with practical examples. If you have any difficulties while reading, you can always refer to Jason Zweig's comments. In addition, at the end of each chapter there are detailed comments on its main theses.

One of Benjamin Graham's favorite allegories is "Mr. Market." Every day he offers us something to buy or sell at one price or another. We can agree with his proposal, or we can refuse when the prices seem unreasonable to us. In any case, the market will offer us something the next day.

One of the main recommendations that auto books give to investors is to concentrate on the activities of the companies whose shares they buy. Prices will always fluctuate. And the main thing here is to be able to benefit from it. The most attractive investments are securities that are undervalued by the market. At the same time, Graham notes in his book that you need to rely only on your own objective analysis and not pay attention to what other investors think about this stock.

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In total, the book includes 20 chapters, as well as analysts' comments and an afterword. Despite the fact that this work was written and published quite a long time ago (1949) and many examples from it date back to the Great Depression in the USA, it is of practical value for modern investors, especially for those who want to work with American securities .

Benjamin Graham

THE INTELLIGENT INVESTOR

Updated with New Commentary by Jason Zweig

HarperBusiness Essentials

A HarperBusiness Book An Imprint of HarperCollins Publishers

Benjamin Graham

SMART INVESTOR

Updated edition with commentary by Jason Zweig

Publishing house "Williams" - Moscow St. Petersburg Kyiv

Thanks to Jason Zweig

My heartfelt thanks to everyone who helped me update Graham's book: Edwin Tan of HarperCollings, whose insight and endless energy helped organize this project; Robert Safyan, Denis Martin and Eric Gellman of Money magazine, who supported this effort with enthusiasm and patience; to my literary agent, the incomparable John W. Wright, and the indefatigable Tara Kalvarski of Money. I received great ideas and criticism from Theodore Aronson, Kevin Johnson, Martha Ortiz and the staff at Aronson + Aronson + Ortiz LLC; Peter L. Bernstein, President of the Peter L. Bernstein Corporation; William Burnstein of Efficient Frontier Advisors; John S. Bogle, founder of Vanguard Group; Charles D. Ellis, one of the founders of Greenwich Associates; Lawrence B. Siegel, director of investment policy research at the Fond Foundation. I also appreciate Warren Buffett; Nina Munk; to the tireless employees of Time Inc. Business Information Research Center, Martin Fridson, CEO of FridsonVision LLC; Howard Schilit, president of the Center for Financial Research Analysis; Robert H. Veres, editor and publisher of Inside Information; To Daniel D. Fuss of Loomis Sayles Co.; F. Barry Nelson of Advent Capital Management, staff of the Museum of Financial History of the United States; Brian Mattes and Gus Sauter of Vanguard Group; James Seidel of RIA Thomsom; Samilla Artamura and Sean McLaughlin of..., Alex Auerbach of Ibbotson Associates; Anette Darson of Morningstar, Jason Bram of the Federal Reserve Bank of New York, and an investment fund manager who wished to remain anonymous.

And most of all, I am grateful to my wife and daughters, whom I pestered for months with my 24/7 work. Without their devoted love and patience, I could not have done anything.

Warren Buffett: Preface to the Fourth Edition

I read the first edition of this book in early 1950, when I was 19 years old. At the time, I thought it was the best book on investing ever written. I still think so.

Achieving success in investing does not require a supernaturally high IQ, an unusual approach to business, or possession of inside information. Success requires sound decision making and the ability to control emotions to protect your method from its destructive power. This book describes the appropriate approach clearly and precisely. First of all, you should practice emotional discipline.

If you adhere to the behavioral and business principles that Graham promotes, and pay close attention to the invaluable advice outlined in Chapters 8 and 20, you will not be disappointed with your investment results. (They contain more relevant knowledge than is apparent.) Whether or not you achieve outstanding results will depend on your attempts and smart investing decisions, as well as the reckless range of the stock market. The more foolish the behavior of the stock market, the greater the opportunity for an investor who behaves like a businessman. Follow Graham's advice and you can profit from the vagaries of the stock market rather than participate in them.

For me personally, Ben Graham was not just the author of this book or my teacher. Next to my father, of all the men, he has had the most tangible influence on my life. Shortly after his death in 1976, I wrote a short obituary about him in the Financial Accounting Journal. I think that as you read this book you will appreciate some of the qualities mentioned in it.

BENJAMIN GRAHAM

A few years ago, Ben Graham, then in his eighties, told a friend that he hoped to do every day “something stupid, something creative and something generous.”

This unusual goal demonstrates his ingenious ability to express ideas in a form that contains no subtext or conceit. Despite the strength of his ideas, they were presented in a bland manner.

Readers of this magazine do not need to clarify his achievements according to the creativity scale. It is quite rare that the work of the founder of a branch of knowledge is not surpassed by his followers. But 40 years after the publication of the book that brought some structure and logic to a chaotic and confusing activity, it is difficult to find possible candidates who managed to achieve even a second position in the field of securities analysis. In a field where many things look stupid just weeks or months after publication, Ben's principles remain sound - their value is often amplified and made clearer during the financial storms that destroy less smart companies. His sound instructions provide constant reward to those who follow them - even to those who are by nature less gifted than other practitioners who make mistakes by following flashy or fashionable new advice.

It is remarkable that the influence that Ben has achieved in his professional field has been achieved without specifically focusing all his efforts on one thing. It was rather an accidental by-product of an all-encompassing mind. A phenomenal memory, a constant attraction to knowledge and the ability to melt it into a form acceptable for solving seemingly unrelated problems ensured the applicability of his way of thinking in any of the areas of interest to him.

The third exceptional quality inherent in him - generosity - set him apart from the crowd. I knew Ben as a teacher, my employer and a friend. In any capacity - with all students, employees and friends - he had absolute freedom, generosity with ideas, time or mood. If you needed clear language, then the best place to go was to Ben. And if there was a need for support or advice, Ben was always there.

Walter Lippman spoke with respect of people who plant trees for other people to sit under. Ben Graham was just such a man.

Preface

What is this book about?

The purpose of this book is to assist lay people in developing and using investment policies. It says relatively little about the technique of securities analysis. The main attention is paid to the principles of investment and the position of investors, i.e. their attitude to the choice of securities. This is a condensed comparison of the stocks of a number of companies - mostly in pairs - whose names are listed side by side on the New York Stock Exchange. In a similar way, we want to show the important points that an investor faces when choosing common stocks.

Much attention is also paid in the book to historical examples of the behavior of financial markets, which in some cases relate to events many years ago. To invest wisely in securities, you must first be armed with adequate knowledge of what actually happens to different types of bonds and stocks in volatile market conditions - some of which you may well encounter again in your practice. There is no truer or more appropriate warning for Wall Street than the famous saying: “Those who do not remember the past are doomed to repeat it in the future.”

This book is intended for investors, not speculators, and its first task is to distinguish between the two. We can say that this book is not from the “How to Make a Million” series of publications. In it you will not find a clear and easy path to wealth on Wall Street or in any other field. It is probably appropriate to cite one episode from financial history, especially if more than one useful lesson can be learned from it. In the watershed year of 1929, John D. Raskob, one of the most important figures both in the country and on Wall Street, extolled the benefits of capitalism in an article "Everyone Should Be Rich," published in Ladies' Home Journal. His main point was: that by saving just $15 a month and investing it in quality common stocks and reinvesting dividends, you can earn $80,000 over 20 years, for a total investment of $3,600. If the General Motors financial tycoon were right, it would indeed be a very simple path to wealth. How right was he? Based on our rough calculations, based on investing in the 30 stocks that make up the Dow Jones stock index (DIJA), the predictions...

A global bestseller that has gone through many reprints around the world, the book by Benjamin Graham (1894–1976) is a unique guide to building investment policy. The author, a world-renowned economist and respected professional investor, focuses not on the analysis of securities, but on the principles of investment, suggesting that one should act wisely and carefully, regardless of the behavior of the stock market. Benjamin Graham shows how many opportunities open to the investor who behaves like a prudent businessman. The author's approaches to investing - such as value investing for current assets, entrepreneurial and protected value investing - are invaluable tools that work reliably even in the most capricious markets. Recognized as a teacher by the world's leading investors, Benjamin Graham equips readers with the knowledge of what actually happens to different types of bonds and stocks as the market fluctuates, providing truly invaluable advice on how to make the most of your stock investments.

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Smart investor. The Complete Guide to Value Investing
Benjamin Graham

Benjamin Graham

Smart investor. The Complete Guide to Value Investing