Finance: Benjamin Grahams (Book Review Sample)

Name
Professor
Course
Date
Book Review
Intelligent Investor
By Benjamin Graham
The book intelligent investor by Graham has been used for many years to give an insight of what it means to be a great and a successful investor. It mainly focuses on giving insight to the readers on ways of making high return investments and ensuring the risk levels are low. I would recommend the book to potential investors due to the great knowledge and information contained in it. All other modern books revolve around what Graham was trying to put across. He is described by many as the "father of value investing" because of the many successful investments made for himself and his clients with a very minimal level of risk involved. He was able to explain the hard concepts of investing and make them very simple for the average investor to understand.
From the book, he says that the average investor only follows the market and their investment habits are very poor. They never do any research to determine the profitable shares to purchase. That is why he came up with the various methods of valuation to assist in making investment decisions. This was through evaluation of the various companies’ valuation and diligence at work. An investor should never speculate about the market but should determine the real value of the shares before making the purchase. The information on the value of the company can be done by the computation of the earnings per share of the firm or the cash inflows and cash outflows. He is one of the first few investors to use the financial analysis techniques, make investments in the stock market and get some huge returns. He played a great role in the creation of the Securities Act of 1933.This Act required companies to provide financial statements that had the certification of independent accountants. This would give investors a chance to believe in the statements since they had been prepared by an independent party.
The book is by far the best source of investing insights any investor can ever get. It has shared some great ideas and opened up the minds of many investors. They have been able to capitalize on the market economic status by applying the ideologies Graham has put forward in his book, the intelligent investor. Warren Buffett, another great writer of financial books, recognized the great effort Graham has made by enlightening the average investors. He even came up with an observation that, there was no any investor who lost their investments funds after following Graham’s methods of investments.
The "Intelligent Investor" talks about some of the main reasons that lead to Graham coming up with the book. During the 1929 securities market crash, he lost all his funds, and it is the great desire not to undergo the same after that made him improve his investments skills. He developed techniques that were supposed to increase his earnings with the risk levels being reduced to the minimum. He concentrated on buying shares of the undervalued firms and selling them at a profit later. He used the method of market psychology and the method of investing by numbers when looking at the favorable counters to purchase shares. The investments he made were based on the numbers of the company, and he would later sell the investments at a predetermined value. Under the market psychology method, he used the fear and greed in the stock market to his advantage. The method would later gain a lot of support from Buffett.
He came up with several investing principles as a guideline for effective and efficient investing. They have been used from time in memorial and even the current investors use them to make investment decisions. Graham stresses that instead of the investors running away from the market when the stocks are not performing well, they should search for more investment opportunities. To illustrate this, he recommended that an investor needed to look at the market as an imaginary business partner. The partner is would offer the investor a given price in which they can either buy or sell their securities. Due to the emotions that exist in the market, sometimes the partner would quote a high price and sometimes a low price. The investor should have the power to either accept and buy the interest offer or even sell to them. They should never let the partner’s emotions and views take control of them. In the event the investor is not interested, they can reject it since the partner will always come with a different offer that might be even higher. Their ability to say no to such investments offers gave the average investor a great advantage over other professional investors. They should only take a price that they feel it represents the true value of the stock.
In this book, he recommends t...