Value Investing, Videos

The Intelligent Investor: Chapter 1

The Intelligent Investor: Chapter 1

Get The Full Walter Schloss Series in PDF

Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Published on May 21, 2016

0:02in the first chapter of the intelligent investor will talk about three different
0:06learning objectives the first one what is the Intelligent Investor all about
0:11staying in one investment versus population and the third one passive
0:16investor vs accident lester but let's take a look at the first one so what is
0:21the Intelligent Investor all about well until you investors have booked their
0:26sold more than one million copies and is considered the most important book ever
0:30written in value investing original published in 1949 the author of the
0:35Intelligent Investor is Benjamin Graham Warren Buffett's or professor at
0:40Columbia University the world's richest investor Warren Buffett has said this
0:44multiple times about the book
0:47well let's see what he's actually saying I guess I'm lucky days in my life but
0:51one of the luckiest was in 1949 when I was 19 years old and like Nebraska I
0:58picked up a copy of the Intelligent Investor but not only changed by
1:03investment philosophy it changed my whole life I would be a different person
1:09at a different place if I hadn't foreseen that book I got a bedrock of
1:15investment philosophy is really hasn't changed ever since I read the book I'm a
1:21embellish on a little here and there but it was Ben's idea that somebody down the
1:26right right path because for Buffett himself the book provided him with an
1:33investment philosophy that hasn't changed even though he talks about how
1:37his bill on it I think he captures the essence of the Intelligent Investor
1:41everyone that's new to investing should read this book and make it the
1:46foundation for their investment philosophy and he said that I think it's
1:51best for new investors to find their own path but I like to stress that numerous
1:55successful investors including icon ambulance last has used the Intelligent
2:01Investor ask the framework a framework that never changes in this media serious
2:07I'll go through the highlights of each other twenty chapters one at the time
2:11but let's start
2:14but the two additional very addictive so we have here in 2001 the first one was
2:18investment speculation the intelligent investor is written with investors in
2:24mind as opposed to speculators and your first task is to distinguish between the
2:29two
2:30ever Grand things that many people confuse the investor with a speculator
2:35and also says that really depends on the time period we are in so allow me to
2:40leverage this the first time grim make the distinction between investment and
2:46speculation was in 1934 after the Great Depression back then everyone was very
2:52skeptical about investing in stocks and bonds and people started to Colima
2:56cautious investors regulators later with Mr conditions improve his soul that even
3:02reckless speculation suddenly started to become investing but what's the real
3:06difference here
3:08well when you mean ground coming up this definition promoting the safety of the
3:13principal and return that investing and what this means is that before you can
3:20even stop to talk about investment you need to think about not losing money you
3:25should have a very limited risk of losing any of your principal before you
3:29even start considering but returns you can achieve what does this mean that
3:34there is no risk and you can't lucien money if you invest like insulation
3:38master sadly no Graham action is says that there is no investment without a
3:45minor ailments elation since you can't predict the future
3:49ever grand provided you with the tools in this book to protect your principal
3:54and also shows you at the same time how you can draw your capital if you do your
3:59homework he has one where caution though he says that no matter what stuck your
4:04pic if you use debt or invest in with money he can't afford to lose that will
4:09always be pure speculation in the original book actually cause the passive
4:15investor for defensive and the active investor for aggressive or the
4:20enterprising investor so if you read the original book please don't be confused
4:25about my choice of words I'll just go ahead and use that room that you would
4:28use today basically Intelligent Investor talks about two different investment
4:33approaches and it's not like one stretches fear than the other and I do
4:38want to stress one thing at active investor is not the same as a speculator
4:43so you actually have two different approaches here but which approaches you
4:48choose really depends on your personality and how much time you will
4:52spend it's important that you choose one or the other and hopefully this course
4:57conchita what's right for you so let's meet the main characters of the book
5:02passive and the active investor in my example I've chosen to call the pass
5:07investor for lender typically has the addictive of getting close to my return
5:12and other justice important feature is that she wants the freedom of bother as
5:18Benjamin Graham express it in the insides investor so basically Linda
5:23wants to come pound her capital but it doesn't want to spend hours researching
5:28what stocks and bonds to buy so basically she does two different things
5:32she uses what is called a dollar-cost averaging approach and with this
5:38basically means is that if she concludes assets a $500 a month and that is what
5:43you she will invest well she doesn't spend the time to figure out if the
5:46stock market is high or low she won't see if he can time it or trade
5:51individual stocks but basically just buy securities with the same amount every
5:55month this is because Linda knows that on average
6:00well she will buy an average she both buys into stocks and bonds and we'll see
6:05later in Chapter four and five which type of stocks and bonds growth things
6:09that suit investment style but for now just think of Linda as an individual was
6:15satisfied with my return and want to spend her time on the hobbies and not
6:19answer organizing individual stocks advanced is important for me to stress
6:24that this is actually the approach the passive approach their Warren Buffett
6:29suggest for the vast majority of investors now this might cause your
6:34shoes is enacted invested myself
6:37by you saying that you need to spend so much time to really understand the stock
6:41market if you want to be an active investor so you don't want dedicate time
6:46you're probably better off saying that I'm getting really decent man returns in
6:51the stock market now let's talk about the person who grand calls the
6:56aggressive investor or who I like to call an active investor let's just call
7:02him john john wants a higher than average might return and since he also
7:07likes investing well contrary to linda he doesn't mind putting in the hours so
7:12he does things a little different he doesn't buy the same amount every month
7:16like Linda John makes an independent valuation all his securities and only
7:21buys when he likes the price he buys high ridge securities that is the same
7:27as Linda by the also buys low ridge churches for instance numerous stock to
7:33the shorter track record and also companies that are not leaders in their
7:37industry RAM goes into detail about how the active investor can be the market
7:42injured 267 and so will I will you on active or passive investor I hope this
7:48course will help you so let's sum this lesson we learn three things the first
7:54one was there we learned that the intelligent investor Warren Buffett's
7:57favorite book and his top book recommendation for all new investors
8:02second we learned that investment and speculation is very different and the
8:07stock investors should engage in investments third we learned that in
8:12investment there are two approaches to Linda Linda return suspended all time
8:16well she was a passive investor and then we met john has been more time than
8:21linda had a more volatile track record but he is what we will call an active
8:25investor I really hope you enjoy the first chapter
8:29graham's the intelligent investor
8:31I hope you'll watch the next lesson we explain why inflation is essentially a
8:36huge costs for the investor and what he can do about it