Is "The Intelligent Investor" method still valid today?

Lessons from the Intelligent Investor


Lillaney, RTI For Money

5/12/20232 min read


Although the method is still valid it has become more difficult to implement as most investors are aware of the method now than they were in the days of Benjamin Graham when he wrote the book. The method still works for commodity/cyclical companies which rise and fall depending on the supply and demand and have huge fluctuations in value. For growth companies other methods are more appropriate like PEG, DCF, etc.

Given below are the top 3 things that I learnt from the book “The Intelligent Investor”.

  1. The most important lesson that I learnt from the Intelligent Investor is that there is a difference between value and price.

In the days when Benjamin Graham invested most of the stocks had hard assets and could be valued easily on those basis.

You could then compare the value with the price that was being offered in the market at that time to determine if the stock should be bought or sold.

  1. The second most important thing that the book teaches us in the form of Mr. Market is that the market acts in extremes and quotes ridiculous prices for the stocks of the various companies based on mood swings.

If you are an intelligent investor, you will take advantage of the mood swings and make rational decisions to buy or sell depending on the valuation that you calculate for your companies.

  1. The third most important thing that the book teaches us is that we should always have a margin of safety. What this means is that there should be room for error in our analysis which will ensure safety of our capital even if we are wrong in our analysis.

For example, let's say we calculate the value of a company as 1000. If it's available at a price of 300 we have a huge margin of safety.

If it's available at a price of 500 we should still be safe and have room for some profits.

If it’s available at a price of 950 then we have a very small room for error and consequently very low margin of safety.

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