The Intelligent Investor

The Intelligent Investor was first published in 1949. Over the following years, Benjamin Graham updated his work, releasing several new editions until 1973. The core principles remained largely unchanged, but the industry and the market experienced significant transformations from the book’s initial publication to the present day.

One of Graham’s fundamental teachings, as explained through the parable of “Mr. Market,” still holds true. Graham reminds investors that they have the power to agree or disagree with Mr. Market and make informed decisions based on their own analysis and research. While Graham depicts Mr. Market as a character who knocks on an investor’s door each day with a new offer, today’s investors can buy and sell stock throughout the day. Equipped with a smartphone in their pocket, they can choose to buy or sell their shares at a moment’s notice.

Investors today also have greater access to information, which has advantages and disadvantages. On one hand, investors have more data to make informed investment decisions. On the other, the abundance of information can lead to information overload, making it hard for investors to separate valuable insights from noise. Graham urges investors to ignore the noise and focus on the underlying value of the investments. He says of Mr. Market, “You do not have to trade with him just because he constantly begs you to” (215). Today, Mr. Market begs investors to trade through various platforms, apps, and online brokerage services, constantly bombarding them with alerts and notifications.

Zweig affirms that the rise of financial TV and online trading in the late 1990s made it even more important for investors to resist the temptation to constantly trade. He highlights how irrational it is to pay attention to tiny fluctuations in the market: “If a TV reporter hollers, ‘The market is plunging—the Dow is down 100 points!’ most people instinctively shudder. But…that’s a drop of just 1.2%. Now think how ridiculous it would sound if, on a day when it’s 81 degrees outside, the TV weatherman shrieked, ‘The temperature is plunging! It’s dropped from 81 degrees to 80 degrees!’” This example has become even more applicable in the context of the 2020s, as the speed of trading and availability of information has only increased. As Zweig points out in his commentary on Chapter 1, “In 1973 […] the typical shareholder held a stock for five years before selling it. By 2002 […] the holding period [shortened to] only 11.4 months” (37). And today, with the advent of high-frequency trading and algorithmic trading, holding periods can be as short as milliseconds. As of 2022, the average investor holds shares for less than six months. Social media has also impacted investing. Individual investors now have access to investment advice and opinions from largely unregulated social media platforms. Graham’s skepticism toward unvetted pundits, as highlighted in Chapter 10 of The Intelligent Investor, is even more relevant today.

Graham argues that investors must resist the urge to engage in excessive trading and maintain a long-term perspective. The rise of financial TV, online trading, smartphones, and social media has only amplified the need for investors to ignore short-term market movements and instead focus on the fundamental principles of investing.