I was recommended this book by a friend of a friend in finance who said it was a good place to start if I wanted to learn about investing. I thought it was an excellent book, if a bit dense, and it taught me everything I needed to know to get started on saving and investing.
The interesting thing about this edition of the book is that it's almost like two books in one. The original book, and the first half of each chapter, was written by Benjamin Graham before his death and last updated around 1971. This means that half the book is looking back at the upheaval at the end of the 60's, and making forecasts about what to expect about the 70's and 80's. Some of the information is dated as well, because various trends in the financial industry have fallen out of favour since the 1971 edition, 40 years ago. Hell, it was written before the age of the internet - in one section Benjamin refers to 'engraved certificates' which confused me at first, until the footnote explained that before the internet and electronic shares, these were used to show share ownership.
The second half of each chapter is a commentary on the original chapter written in the early 2000's by Jason Zweig. He provides context on things Benjamin doesn't quite explain because they would have been assumed knowledge in the times, updates forecasts for the modern age, and provides analysis on all of Benjamin's predictions - which are pretty spot on most of the time, thanks to his policy of caution above all else. It's written before the 2008 financial crisis and so is still a bit out of date, but for the purposes of this book, that's not important.
At its heart, this book aims to educate the reader on what the basics of stocks and bonds are, how and why to invest in each, as well as providing two complementary strategies for investing, a 'defensive' and 'enterprising' approach. It resoundingly succeeds at this purpose, answering all the questions I was asking before and as I read. If you've ever wondered about any of these things, you can find the answer in this book:
- What is a stock?
- What is a bond?
- Why do people invest in them instead of putting their money in the bank?
- How do companies get started and funded?
- How does ownership of a company work?
- How do corporate takeovers work?
- How should you invest if you want minimal oversight of your portfolio?
- What if you enjoy trying to speculate?
- How should you invest if you're starting at 20? 40? 60?
- What causes 'bubbles' and what even are they?
- How do you evaluate whether the price of a stock is too high or low?
- What is P/E (Price/Earnings) ratio? Operating Income? Net revenue? Market cap?
- How do you use these numbers to judge whether or not to invest in a stock?
Along with many more countless things I didn't even know I wanted to learn about. It's worth noting that Jason Zweig is every bit as important to this book as Graham, despite his constant insistence on Graham's brilliance. Graham can be at times wordy, dry, or a bit archaic in his language (and fair enough, it was written over forty years ago). Jason adds footnotes and commentary that explain in simple terms what Benjamin is getting at, or what recent (at the time) event he is referring to.
The only criticism I can give this book is that it is very dense, and at times I had to push through the 1970's bits to reach the more interesting commentary. I also love math and numbers, and have a degree in stats, and so the pages of tables and numbers didn't intimidate me much. If you don't deal with numbers on a daily basis, you might find it a bit hard to parse at times there as well.
Do I recommend this book?
I cannot recommend this book enough if you want to learn 'Investing 101', and if you like reading enough to push through (or skim) the slow parts. But be warned, it is a long read, with over 600 pages of finance chat, and plenty of tables and charts sprinkled throughout.