Copyright © 2024 LifeSpectrum360.com All Rights Reserved
Smart Wealth: The Intelligent Investor Audiobook Guide
Readers like you help support Lifespectrum360.com. When you make a purchase using links on our site, we may earn an affiliate commission. Read More.
“Welcome to ‘Smart Wealth: The Intelligent Investor Audiobook Guide’. Immerse yourself in timeless investment wisdom narrated for your success. It’s a timeless classic, and we are reviewing this as the first reading material as part of next gen personal finance suite.
If someone asks to pick only one book in life to read, then this will be that book, and I will tell you the reasons in a detailed review section. Some of the lessons I have learned from “The Intelligent Investor Audiobook” –
Patience is the key to success, but unfortunately, patience is in short supply. If you have this, market will reward you handsomely.
In the short run, market is like a voting machine and in the long run, market is like a weighing machine.
The stock market with daily quotes is like a casino only without free cocktails. An intelligent investor is better off if his stocks have no market quotation at all.
For an enterprising investor, words or phrases like pro forma, nonrecurring charges, special charges, and goodwill could be indirect terms for a smoke screen. Be aware of them.
If a defensive investor doesn’t have enough time, he will be better off in putting his money in index funds.
I read it twice. The first time when I read, I made my notes. When I read for the second time, I realized I left many things in my first read. So, I amended my notes, and then it became a comprehensive read and I put all of them for your reference.
“The Intelligent Investor Audiobook” is written by Benjamin Graham, considered the father of value investing. His disciples include famous names like Warren Buffet, Jason Zweig, and Walter Schloss, who have immensely benefited from his value-investing approach. Jason Zweig has done a fantastic job bringing the principles in the book to life through modern examples in his commentaries on each chapter.
Warren Buffet says, “By far the best book on investing ever written” about this book.
Table of Contents
"The intelligent investor audiobook" - detailed review
If you are aware of investing, you should listen to each chapter at least twice to get the best out of “The Intelligent Investor Audiobook”. But if you are new to investing, I suggest you read the following chapters first.
Introduction
Many people ignore the introduction in any book as a non-important one. However, you can not afford to miss the introduction of this book. Graham defines the objective of this book in a very crisp manner and separates the “Intelligent investor” from the “Speculator”. As per him: “An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”
Graham mentions that intelligence is a trait more of character than of the brain. Jason Zweig sets the tone of this book in the commentary to the introduction straight away by taking the example of Sir Isaac Newton. He explains how intelligent people like Newton lost on his investment in the “South Sea Company”. Therefore, “if you lose, it is not because you are stupid, it is because you have not developed the emotional discipline that successful investing.
chapter - 1: Investment Vs Speculation
In the current scenario, every person who deals with the stock market, mutual funds, real estate, gold, bonds, options, futures, etc. is called an investor. However, in the book, it is labeled as a myth, and Graham busts this myth in detail. The book separates people into two categories – 1. Who has patience and expectations of decent return from the capital. 2. Who try to outsmart the market, become impatient over short-term returns, and give more focus on price movements rather than fundamentals.
chapter – 8 – Investor Vs Market fluctuations
Most modern investing gurus treat this chapter as part of behavioral finance. This chapter mentions about how to deal with the emotions while handling finance. It has dealt with popular investment approaches like “Formula Investing”, “Market Timing” and many more. You will gain more insights into these approaches with rationale, facts, and figures. Buffet mentions that this chapter is one of his most favorite, along with Chapter 20.
The stock market with daily updates resembles a casino, only without the comfort of free cocktails. Watching the stock ticker is like having a business partner that is insane; Graham calls him “Mr. Market”. One day Mr. Market loves the business and wants to pay a ridiculous price to buy out your half. The next day, all hope is lost, and “Mr. Market” wants to sell everything at throwaway prices. Graham argues that this daily liquidity is an advantage that most investors turn against themselves.
In page 203, he mentions, “The true investor scarcely ever is forced to sell his shares, and at all other times, he is free to disregard the current price quotation. He needs to pay attention to it and act upon it only to the extent that it suits his book and no more. Thus an investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his advantage into a disadvantage. That person would be better off if his stocks had no market quotation at all, for he need not have the mental anguish from others’ mistakes of judgment.”
This sentence is profound. It is not a question of whether your stocks will drop; they will drop: the question is, how will you respond to that eventuality?
Chapter 8 is the longest in “The Intelligent Investor Audiobook”. So, take multiple breaks. Do not listen to the entire chapter at a stretch, and 10-15 minutes, based on your comfort level, will be enough for a single stretch. If you miss something, you can always rewind the audiobook and listen.
chapter – 20 – Margin of Safety as the central concept of value investing
Your path to becoming a value investor is incomplete without the “Margin of Safety” concept. Chapter – 20 is Warren Buffet’s other favorite chapter. We can say that Graham is very defensive because he saw many bear markets, including the great depression of 1929-32, and it took 25 years (till 1954) for the market to reach the pre-crash levels of 1929. But “Margin of Safety” is very relevant even today. Because bear markets repeatedly come when everyone becomes too complacent, and when they come, the margin of safety comes to the rescue of the investors.
Graham defines margin of safety as “Past ability to earn in excess of interest requirements constitutes the margin of safety that is counted on to protect the investor against loss or discomfiture in the event of some future decline in net income.” (page – 512)
For growth investors, the margin of safety recommended by Graham may not sound good, because they always look for future earnings growth for their stock selection, not very much on past earnings. They are neither right nor wrong. It’s their perspective. As Graham mentions, if a portfolio of stocks is built with a sufficient margin of safety, then the chances of favorable results under fairly normal conditions are very large.
Jason Zweig adds in the commentary to chapter – 20 that the first principle for a value investor should be “Don’t Lose” if such favorable results are expected. Giving an example, he says that if a stock loses its value by 50% immediately after your purchase and gives a 10% consistent return thereafter, it will take 16 long years to match with the performance of a stock that gives only half return @ 5% annually without losing its value.
This is a strong statement for his “Don’t Lose” principle.
Warren Buffet went further and said:
First rule – Don’t lose.
Second rule – Don’t forget the first rule.
You will enjoy listening to this chapter in “The Intelligent Investor Audiobook” and appreciate the reason why this is the favorite chapter of Warren Buffet.
messages in other chapters
Apart from these chapters, you will find information on two different ways of investing, depending on how much time you must put into the matter. For people who are busy with many other things, he advocates a “defensive investing” style that focuses on time-tested, proven, and larger companies. Graham suggests going for something steady and sure. Defensive investors should not try to beat the market but rather try to keep up with it. If you do not have time to do the necessary homework for stock selection, you will be better off buying index funds alone.
For those who can afford to put a lot more time and devotion into investing, he advocates “enterprise investing,”. He lays out a more rigorous approach and returns expectations for enterprise investors. This type of investor should put extra effort towards understanding balance sheets, cash flow statements, taxations, dividend policies, industry outlook, local regulations, and many more. Words and phrases like pro forma, nonrecurring charges, special charges, and goodwill could be indirect terms for a smoke screen.
He introduces the phrase `kitchen sink accounting’ that puts all possible losses into one year to get good tax benefits. The lesson is not to ignore the footnotes and to read the annual statements to the end.
Graham dismisses the Efficient Market Theory (or EMH), which says that investments always have the correct prices because so much widespread information is readily available.
There is an excerpt in the appendix (“The Superinvestors Of Graham And Doddsville”) from the speech by Warren Buffet that was given at Columbia University in 1984, commemorating the 50th anniversary of “Security Analysis” another popular Benjamin Graham book. Supporting Graham’s views, Buffet gives an example of how a person can claim to earn $225 million by successfully flipping a coin 20 times in a row and can go on to write a book on “How I Turned a Dollar into Million in Twenty Days Working Thirty Seconds A Morning”.
It is arguably the best rebuttal to the Efficient Market Hypothesis that anyone has ever put out (page – 537). People who rely on technical charts will dismiss Graham and Buffet straight away. But I am not sure any of the EMH supporters have ever been able to answer Buffett’s arguments so far.
Graham equates the market to a voting machine in the short run and a weighing machine in the long run. The price of an investment goes up when investors `vote’ for it. Later, when sanity comes, investors find the true worth of that investment, and the price settles at its real value. He cites numerous examples in the tech bubble era of the late 1990s, where stock prices ascended to ridiculously high levels before crashing down to almost nothing.
some pitfalls
Because this book was from the 1970s, some of the methods mentioned are irrelevant today, like cheque handling. But these are minor things readers can ignore, looking at the larger objective of the value investing approach this book tries to achieve.
Graham also emphasizes the dividend income from stocks and compares that with the bond interest rates as one of the inputs to decide on the investment climate, which is probably less relevant today. In his day, strong companies paid out investors a good amount from their surpluses, whereas these days, that is far less common. However, the continuity of dividends is still relevant today as one of the inputs in stock selection.
Conclusion
Listening to “The Intelligent Investor Audiobook” is an enjoyable experience, like Shakespeare to the investing crowd. Despite being a realist, Ben Graham was not a total pessimist. Late in the book, Graham makes a strong statement – (p. 524, chapter – 20) “A fourth business rule is more positive: “Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it- even though others may hesitate or differ. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right. Similarly, in the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand. “
I did my best to cover as many points as possible from the “The Intelligent Investor Audiobook”, but it is humanly impossible to cover all the details from such a timeless book. I would suggest you enjoy reading it at least once and I am sure you will not regret it.
“The Intelligent Investor Audiobook” is the audio version of the book “The Intelligent Investor”. The listening length is around 17 hours and 48 minutes, narrated by Luke Daniels. It is better to take notes while listening to the chapters. Do not rush through the chapters. To get the essence of the book is more important, and not the race against time to finish the book. You may need to listen to it multiple times, so have patience and enjoy the listening.
The benefit of “The Intelligent Investor Audiobook” is, that you can enjoy listening to it while sitting inside the cab on your way to the office, and it does not take additional time to give the most valuable investment lessons.
The “The Intelligent Investor Audiobook“ is available for FREE on Amazon as of writing this review. The audiobook is also available in paperback, hardcover, and audio CD formats. If you are from India, you can go to Amazon (India), if you are from another country, you can go to Amazon (International) to check the price.
Let “The Intelligent Investor Audiobook” be part of your financial freedom book collections.
About the Reviewer
He is a seasoned finance professional with over two decades of experiences in large banking and finance companies. He is a certified Financial Risk Manager..
Birendra Sahu, FRM, CISIExpert in Personal Finance and Wealth Management 