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The Intelligent Investor by Benjamin Graham - Chapter Three

This is a summary of Chapter Three:  A Century of Stock Market History: The Level of Stock Prices in Early 1972  of  The Intelligent Investor   By  Benjamin Graham .  The investor's portfolio of common stocks represents a small cross-section of the stock market and prudence suggests that an investor should have an idea of stock market history, particularly the major fluctuation in price level, and the relationships between stock prices as a whole and their earnings and dividends. This provides a background for the investor to form some judgement of the attractiveness or dangers of the market level at different times.  Graham presents data of 100 years, going back to 1871, in order to show in general how the underlying value of stocks have increased through the many cycles of the century and by viewing the data in terms of consecutive ten-year averages, to establish the relationship between stock prices, earnings and dividends. He summarizes the long-term history of the stock market
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The Intelligent Investor by Benjamin Graham - Chapter Two

  This is a summary of Chapter Two: The Investor and Inflation  of  The Intelligent Investor   By  Benjamin Graham .  The loss of purchasing power due to inflation in the past and the fear (or hope by speculators) of further losses in future had influenced the thinking of Wall Street. People with fixed dollar income will suffer when cost of living rises and the same applies to fixed amount of dollar principal from bonds. On the other hand, there is a possibility for people who hold stocks that the loss of purchasing power may be offset by increases in both dividends and share prices.  Based on the above, many financial authorities have concluded that: bonds are inherently an undesirable form of investment common stocks are by nature more desirable investments than bonds Graham feels that readers should recognize that even high quality stocks cannot be a better purchase than bonds under all conditions, i.e. regardless of how high stock prices may be, or how low the current dividend retu

The Intelligent Investor by Benjamin Graham - Chapter One

This is a summary of Chapter One: Investment versus Speculation: Results to Be Expected by the Intelligent Investor of  The Intelligent Investor   By Benjamin Graham .  Graham introduces his viewpoints that will underlie the remainder of the book and develops the concept of appropriate portfolio policy for the individual, non-professional investor.  Investment Versus Speculation An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.  Risks are inherent in common stocks - risks are inseparable from the opportunities of profits that they offer, both of which must be taken into consideration by the investor when making a decision.  The investor must recognize that a speculative factor exists in his common-stock holdings and he has to keep this component within minor, acceptable limits and be financially and mentally prepared for adverse results from the short to the lon

The Intelligent Investor by Benjamin Graham - Introduction

This is a summary of the introduction chapter of The Intelligent Investor By Benjamin Graham .  To invest intelligently in stocks, one should have adequate knowledge of how the various types types of bonds and stocks behave under various conditions, as the investor is likely to meet again such scenarios in his own experience. Santayana mentioned that those who do not remember the past is condemned to repeat it.  Most speculators are guided by charts or other mechanical means of knowing the right moment to buy and sell. One principle that underlies such “technical approaches” is that one should buy because stock price has gone up and sell because it has declined. However, nobody can consistently make money by “following the market”. Between 1965 and 1972, there are a number of new developments, including: An unprecedented increase in interest rate on high grade bonds A fall in price level of around 35% of leading common stocks, ending in 1970 Persistent inflation of wholesale & co