Summary of The Intelligent Investor For People in a Hurry: Rohit Mishra

Rohit Mishra

The following is a succinct summary of arguably the most important and influential value investing book ever written.

Fundamental analysis as a stock-picking technique has been pursued forever by multiple world-renowned investors and common denizens all around the world. All the followers and devotees of this approach of investing consider "The Intelligent Investor" as a bible that furnishes their thinking regarding this coveted approach.

However, a lot of confusion emanates from the fact, especially to readers who have just entered the investing realm, that the book is difficult to read and understand.

However, there are three ideas that are essentially valuable in "The intelligent investor". Primarily, the book states that stock should be viewed not just as an instrument that fluctuates in prices but as a piece of an ownership stake in the respective business. This insight leads us to think about stocks as a business whose underlying value is associated with its business fundamentals. As per this theory, if the business fundamentals are sound, slowly and eventually its market value will reflect its underlying intrinsic value. Not only that but if the stock you invest in is purchased from this approach, you are likely to profit from the vagaries of the market.

The second principle of this book is concerned with the "margin of safety". That is to buy each share at a discount to its intrinsic value. Why do we need to do so? It is because since we are human beings and are likely to make errors in our judgment regarding the evaluation of future prospects of the business. It is better to purchase shares at a discount from their intrinsic value, as our assessment of the ability of future earnings of the company might be skewed by various biases.

The third most important idea is that a stock market is a place where you will earn a lot more with simple ideas rather than sophisticated ideas. This doesn't mean that your ideas should be superficial. What it means is never try to do anything in the stock market that is outside the level of your understanding. Why so? It is because the stock market is essentially a place filled with risk. To be able to navigate the risk one needs to operate within one's circle of competence.

Benjamin Graham describes such an investor as a defensive investor in chapter 5 of the book and mentions that if an investor is able to control his emotions regarding the volatile market movements he is likely to profit provided that he has bought companies with sound business fundamentals at a lower price (whenever market provides the opportunity to do so).

Rohit Mishra is a BBA student at Shanker Dev Campus.