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The Intelligent Investor "For Beginners"


widenthemoat
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I wanted to see if anyone on the board had a recommendation for a book that really hits on some of the major concepts in The Intelligent Investor (e.g., Margin of Safety, Mr. Market) that I could get for my girlfriend with no finance or investing background. She loves when I explain these concepts to her in layman's terms and wants to learn more about investing but when she starts reading The Intelligent Investor or any other book I recommend her eyes glaze over immediately.

 

Thanks in advance.

 

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I wanted to see if anyone on the board had a recommendation for a book that really hits on some of the major concepts in The Intelligent Investor (e.g., Margin of Safety, Mr. Market) that I could get for my girlfriend with no finance or investing background. She loves when I explain these concepts to her in layman's terms and wants to learn more about investing but when she starts reading The Intelligent Investor or any other book I recommend her eyes glaze over immediately.

 

Thanks in advance,

Dan

 

You could ask her to just read those two chapters (I think they are Chapters 8 and 20). If she is just starting out, that might be an easier introduction than reading a whole book.

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I wanted to see if anyone on the board had a recommendation for a book that really hits on some of the major concepts in The Intelligent Investor (e.g., Margin of Safety, Mr. Market) that I could get for my girlfriend with no finance or investing background. She loves when I explain these concepts to her in layman's terms and wants to learn more about investing but when she starts reading The Intelligent Investor or any other book I recommend her eyes glaze over immediately.

 

Thanks in advance,

Dan

 

You could ask her to just read those two chapters (I think they are Chapters 8 and 20). If she is just starting out, that might be an easier introduction than reading a whole book.

 

Doesn't the book itself actually recommend that in this situation?

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Is she a reader? If not getting a book thrown at her is the wrong thing to do.

 

She probably likes when you explain this stuff because you're passionate about it, and when people are passionate about things they're engaging.  Will she get that from a book?  Maybe not, maybe a dry book with lots of math and finance geekery will turn her off investing.

 

I'd recommend continuing to explain this stuff.  It has two benefits, you A) teach her, B) learn yourself because you'll be challenged to learn more.

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The Little Book that Beats the Market is ideal for people who have no business background. It explains that you want to buy a business for a low multiple of earnings that can reinvest at those earnings at a high rate.

 

Maybe not the exact concepts of Margin of Safety but my go to for absolute beginners.

 

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I think Peter Lynch's books are a better place to start for the lay investor.  A lot less investment jargon.  It's been quite some time since I read any of them but I don't recall any specific discussion of margin of safety.  As I recall, Lynch really emphasizes thinking about stocks as businesses.  He also emphasizes keeping it simple by investing in companies you're familiar with (you use their products for example).  For someone who doesn't know the difference between a balance sheet and an income statement, I think Ben Graham's books would be too much. 

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I think Peter Lynch's books are a better place to start for the lay investor.  A lot less investment jargon.  It's been quite some time since I read any of them but I don't recall any specific discussion of margin of safety.  As I recall, Lynch really emphasizes thinking about stocks as businesses.  He also emphasizes keeping it simple by investing in companies you're familiar with (you use their products for example).  For someone who doesn't know the difference between a balance sheet and an income statement, I think Ben Graham's books would be too much.

 

When I think of Lynch's books I just think of Leggs eggs.  Being hauled around to clothes stores with my mom I saw those things everywhere.  While reading the book I had this weird mental connection, "of course Leggs worked out, those things were all over the place!"

 

I read the first Lynch book in 2006.  I finished it on vacation in Florida and remember starting to think to look for what was popular.  The impression I came away with was that new condos, new construction, banks, and housing related stores were popular.  I remember looking at the Williams Sonoma and Restoration Hardware (two stores that were all the rage amongst our friends then) and couldn't back their valuation into their market price without some lofty assumptions.  Thankfully I passed. 

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I really hate The Intellligent Investor as a first investing book for someone with no investing or business experience. The same thing happened to me as with your girlfriend. A friend gave me his copy of The Intelligent Investor to read in the freshman year of college. I couldn't get through it at all.

 

And yet now it's one of my favorite things to read. I think you really kind of have to know what Graham alludes to in his fairly dense writing style to get it, at least for us mere unexceptional mortals. That can be not only from investing in public markets but also running or participating in a business I think.

 

I think a better choice is a good efficient market-based book that recommends indexing, like A Random Walk Down Wall Street or one of Bernstein's books. They're written in a much clearer way and more obviously meant for true laypeople. And I think it makes sense to start with EMH and indexing too. That's where most people should end up, so that's where they should begin, too. I really love The Little Book That Beats the Market as well, but despite what Greenblatt says about it being a book for kids, I think you get a lot more out of it if you have some basic knowledge or experience.

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If you really want the most basic of books that will explain all the different concepts in a general way (albeit with far too much simplification), you have to go with Value Investing for Dummies.  It provides a survey of all the general aspects of value investing and is easy to read and can be read in bite sized pieces from time to time or to cover a specific topic.  I've recommended it several times.

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If you really want the most basic of books that will explain all the different concepts in a general way (albeit with far too much simplification), you have to go with Value Investing for Dummies.  It provides a survey of all the general aspects of value investing and is easy to read and can be read in bite sized pieces from time to time or to cover a specific topic.  I've recommended it several times.

 

In a similar vein, I cannot recommend "Value Investing for Dummies, for Dummies", enough.

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I've recommended Buffetology and The Buffetology Workbook to new investors. Written by Mary Buffett and David Clark, the books present both a qualitative definition of value investing as well as a quantitative look at how to evaluate consumer monopolies selling at the right price. Can also be easily read in sections. Even if she reads just the qualitative section ,  I think she'll have a better understanding of how to look at her investments ie companies/ mutual funds/ index funds. With that better understanding, risk tolerance and patience will develop .

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I read The Intelligent Investor as my first one on value investing back when I hardly knew what a bond was and thus understood very little of it. Recommending that one to a total novice is a case of the curse of expertise. Or perhaps just the aping of you-know-who. The Warren Buffett Way and the Peter Lynch books were way more appropriate to my level of knowledge at that point.

 

Or maybe this is the right fit:

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I read The Intelligent Investor as my first one on value investing back when I hardly knew what a bond was and thus understood very little of it. Recommending that one to a total novice is a case of the curse of expertise. Or perhaps just the aping of you-know-who. The Warren Buffett Way and the Peter Lynch books were way more appropriate to my level of knowledge at that point.

 

Or maybe this is the right fit:

 

I've suggested the Ackman video to many beginners. It's excellent.

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