If you wanted one and only one take away from this book it's the following tip: "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative." The rest of the book is about telling you how to tell the difference (e.g. buying a stock today hoping that it will go up tomorrow WOULD NOT be investing) and how to analyse a companies financials.
I began this book thinking I might have a side hobby of picking individual stocks as a side hobby. This book dispelled me of the glamour of that notion. As Benjamin Graham himself notes, a passive investor (someone who invests to at least match the average return of the stock market) can enoy success with a minimum of time while an enterprising investor (someone who works to "beat" the stock market) would only have a reasonable chance of success after doing lots of work as analysis and also having the necessary intellectual aptitude. Being an enterprising investor isn't for me because I can't dedicate the time to adequately research companies as he teaches in his book. I suspect that my situation would be the same as 99% of other people who want to invest their money.
What the book did most effectively for me is resolve my latent Dunning-Kruger effect where I imagined I could beat the intelligent people of Wall Street at their own game. I found the chapter commentaries by Jason Zweig to be especially helpful at highlighting amateur speculators who jumped into hot trends like dot com companies right before the industry collapsed. Both Jason and Ben work painstakingly to illustrate how hard it is to do the work of properly evaluating a company and establishing its true value vs its current price on the stock market or its book value (the balance of how much the companies assets are worth after already accounting for debts and liabilities).
The book helped me become literate about the different forms of investments available to me and the merits and handicaps of each. Bonds, Preferred Stocks, ETF's and Treasury Bills meant nothing to me before reading the book. Now I have a fair enough grasp of all investment tools to know what I'm getting into if I should ever choose to invest. The book is a long read as it goes through the in depth process of educating a lay person like myself but it does its job well. In that sense the book has aged marvelously with the help of modern commentary by Jason Zweig.
One drawback for me is that at various points Graham and Zweig tried to discuss how to address tax on capital income best but the advice was only relevant to an American. As a Canadian, I skipped those chapters and I had to research for myself about best reducing the taxable amount on my investment gains. Canadians might find a similar book written by a Canadian to be a better choice. Better yet, read both and be even more well prepared for investing on your own.
In the end, I decided that a balanced portfolio of ETF's tracking stocks and Canadian bonds. Being able to buy these on my own, without being hand held by a broker means that this book will probably already be saving me hundreds of dollars by the end of the year in management fees. Trust me, this book will pay for itself many times with sensible and sober advice.
In the future, I might do some angel investing for small start ups that I'm familiar with or other non-publicly traded investment opportunities. I'll only be doing that after reading many other books of the same caliber as this one. Even then, I'll be considering Graham's sagely advice to invest based on my careful assessment of what a company is actually worth, or in his words to “invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.”
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