An investment library: The Intelligent Investor

Book reviewThis is the book that no investor should be without, says Matthew Partridge.

The Intelligent Investor

by Benjamin Graham, commentary by David ZweigPublished by HarperBusinessBuy on Amazon

There are many bookson value investing thetwo on this page areamong the most recent.However, the "bible"of the genre has to beThe Intelligent Investor,written by BenjaminGraham, who mentoredWarren Buffett and is considered thefather of value investing. The book isaimed at a lay audience, and is perhapsbest known for two key concepts: themetaphorical "Mr Market" and the"margin of safety".

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While Graham believed the market wasgenerally efficient in the long run, healso thought that in the short run it wasprone to swing between euphoria andpanic. Hence the idea of Mr Market, ajittery individual who is one day happyto buy shares at stratospheric prices,and desperate to sell at bargain basementvaluations the next. Grahamclaims it makes sense to buy sharesthat trade below their "intrinsic value",because in the long run they'll moveback to fair value or above.

How doyou calculate intrinsic value? He looksat many methods but admits it's trickyto do so precisely and that's wherethe "margin of safety" comes in. Byonly buying stocks that are extremelyundervalued, investors can protectthemselves from huge mistakes.

The book was first released in 1949.Graham's final revised editionappeared in 1973, shortly before he died in 1976. Investment writer JasonZweig released a revised edition in2003, which includes Graham's originaltext and Zweig's commentary aftereach chapter. Whichever version yougo for, this is a book that no self-respectinginvestor should be without.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri