The Intelligent Investor

Jason Zweig, a financial journalist and author, is known for his contributions to the field of investing. His work is characterized by in-depth analysis, colorful writing, and a strong emphasis on behavioral finance. Serving as a modern-day commentator in the Revised Fourth Edition of The Intelligent Investor, Zweig provides updated insights into the principles and strategies outlined by Graham. In contrast to Graham’s more formal writing style, Zweig employs a casual and colorful tone that seeks to engage and educate the average investor by making complex financial concepts accessible and relatable. Graham’s detail-oriented approach is juxtaposed with Zweig’s dynamic writing, which focuses on metaphors and anecdotes. For example, while Graham composes detailed arguments to support his views on the value of bonds in the current market, Zweig opts for a vivid analogy to explain the concept: “Meanwhile, at recent prices, bonds offer such low yields that an investor who buys them for their supposed safety is like a smoker who thinks he can protect himself against lung cancer by smoking low-tar cigarettes” (125). His writing is interspersed with vivid imagery to make Graham’s concepts more tangible and memorable.

Zweig often expands upon the psychological dimension of Graham’s work, delving into the irrational behaviors and biases that can influence investor decision-making. He draws on research from behavioral finance to explain how emotions and cognitive biases can lead investors astray and offers practical advice on how to overcome these challenges. When speaking about selecting a financial advisor, Zweig claims that “you should trust your adviser enough to permit him or her to protect you from your worst enemy—yourself” (278). He underscores Graham’s belief that emotions cannot be ignored in investment decision-making and that while an investor cannot control the whims of the stock market, they can control their behavior and reactions to market fluctuations.

Zweig’s emphasis on behavioral finance is not only a reflection of his interests and expertise but also an indication of the evolving nature of investing informed by psychology. Zweig’s commentary provides insight into the changing dynamics of the market, the impact of new technologies, and the evolution of behavioral finance, while still emphasizing Graham’s principles of value investing, which have withstood the test of time.

Warren Buffett, a renowned investor, was one of Benjamin Graham’s most notable disciples. Buffett wrote the Preface to the fourth edition of The Intelligent Investor in which he praises Graham’s approach to investing and acknowledges the profound impact it had on his investment philosophy. Buffett says that after reading the first edition of the book in 1950 at age 19, he thought “it was by far the best book about investing ever written. I still think it is” (ix). Buffett’s success in the investing world can be seen as evidence of the enduring effectiveness of Graham’s principles.

Buffett’s career demonstrates a commitment to value investing, which aligns closely with Graham’s approach. Buffett also espouses the need for emotional discipline, emphasizing that Graham’s work provides “a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework” (ix). Buffett agrees with Graham’s belief that emotions and impulsive decision-making can lead to poor investment choices and emphasizes the importance of long-term thinking and patience.

Jason Zweig references Buffett more than once in his commentary, often regarding him with reverence. Zweig portrays the investor as someone to be admired and even emulated—except for any investment techniques that require extreme skill. For instance, Zweig points out that, “For indisputably skilled investors like Warren Buffett, wide diversification would be foolish, since it would water down the concentrated force of a few great ideas. But for the typical fund manager or individual investor, not diversifying is foolish” (290). Zweig portrays Buffett’s talent and expertise as unusual and exceptional, indicating that his success cannot be replicated by the average investor.

Zweig also suggests that Buffett’s success is a testament to the effectiveness of Graham’s principles and implies that he regards the two investors as equally influential in the world of value investing. When discussing diversification, Zweig comments, “Late in his life, Graham praised index funds as the best choice for individual investors, as does Warren Buffett” (249). This suggests that Zweig sees Buffett as carrying on and preserving Graham’s investment philosophy, further solidifying the connection between the two figures.

Zweig even dedicates a whole section, entitled “Warren’s Way,” to analyzing Buffett’s stock selection strategy, In it, he delineates the connection between Graham’s work and Buffett’s investing career. He claims that Buffett’s success can be attributed to his adherence to Graham’s principles, while also incorporating unique strategies and approaches: “Graham’s greatest student, Warren Buffett, has become the world’s most successful investor by putting new twists on Graham’s ideas” (401). As Zweig explains, Buffet “looks for what he calls ‘franchise’ companies with strong consumer brands, easily understandable businesses, robust financial health” (401). This aligns with Graham’s emphasis on investing in companies with strong competitive advantages and solid financials. Zweig says that “Buffett likes to snap up a stock when a scandal, big loss, or other bad news passes over it like a storm cloud” (401). This approach reflects Graham’s concept of buying stocks when they are undervalued due to temporary market fluctuations or negative events. Overall, Buffett’s investment philosophy, as outlined by Zweig, aligns closely with the principles laid out in The Intelligent Investor.