Every now and again I plan to use this weekly memo to write a book review and today we take a look at the best book ever written on stock market investing.
I don’t even READ book reviews so I can’t see book reviews happening too often around here.
My preference is reading Twitter lists of top 10 books on investing, finance, or whichever subject catches my wandering attention, buying the titles that have a habit of appearing most often.
So when I do muster up the minerals to write a review, it means I’ve found a book so compelling that I have to share it with you.
Mercifully I can save you the hassle of trawling through the rest of today’s memo and just put it out there: you need to buy The Intelligent Investor by Benjamin Graham.
This book is exceptional, especially if you:
- are a bit lazy like me
- want to understand the basis of my personal investment style
- want the simplest low-risk and profitable investment strategy that you could ever find
That last one is a lie.
The simplest low-risk and profitable stock market investment strategy is to purchase a low-cost tracker fund every month from your wages or as a lump sum – depending on your wealth status – and keep purchasing it then leave it for 40 years.
Set and forget.
I want more CONTROL than that though, don’t you?
But not too much; remember we’re a little lazy. And that’s okay.
I want to make sense of the stock market that most people view as a giant casino.
Spoiler: the stock market IS a giant casino backed by trillions of dollars made up out of thin air.
But that’s a memo for another time.
Here’s why the Intelligent Investor by Benjamin Graham is the best stock market investing book of all time
The investor’s chief problem – and even his worst enemy – is likely to be himselfBenjamin Graham
There is enough quote-worthy wisdom within the pages of The Intelligent Investor to fill a beer barrel.
It’s superb for the occasional tweet/social media post when you’re pushed for time to create content.
“The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future.”— Wealth Accumulated (@djthomas) August 1, 2022
See what I mean? Even if you may not know what the margin of safety is. Chill.
It was written in 1949 with 1949 language but it’s well worth the effort, you’ll see.
Among the opulence of Graham’s guidance is his stated aim: to appeal to EVERYBODY, regardless of your station in life or financial literacy.
From the local parish priest to the multi-billion dollar fund manager.
Oh, and Graham’s strategies have stood the test of time since the book was first published in 1949.
It works. It still works. And it will continue to work, especially in developed Western financial markets.
The secret sauce of the value investing approach that Graham pioneered is a strategy for your lifetime and those of your grandchildren.
One strategy in particular called the relatively unpopular large company is a profitable, low-risk, value investing strategy that I use to this day with great success.
It appeals to both the lazy and risk-taker in me.
Perhaps it can for you.
These characteristics are suited to the value investing approach: buy stocks when they’re cheap, and sell them when they’re overvalued.
Do nothing in between.
The relatively unpopular large company
This investing strategy is about as basic and low maintenance as it gets.
You’re not asked to pour over financial statements, spend hours interpreting breaking news items from the so-called financial media or pull yourself away from the golf course.
Trigger warning: I’m assuming that you play golf, drive a Volvo, and own a labrador.
If you do then you’re winning at life.
The relatively unpopular large company is a paint-by-numbers strategy:
- Buy only large-cap stocks
- Buy them when they are experiencing a period of temporary unpopularity
What’s more, there are different types of value investing approaches for you to choose from if you don’t like this one.
If you feel a more thorough approach to investing is your bag, then there’s one in there for you.
It just depends on how much time you’d like to spend away from the 18th hole.