Essential Takeaways From Chapter 10 of The Intelligent Investor: The Investor and His Advisers

 

In Chapter 10 of "The Intelligent Investor," Benjamin Graham provides insight into the role of advisers in the investing process. Graham notes that while investors may seek advice to make money, seeking advice on how to do so is not the same as seeking advice on how to make a profit in a business.

He encourages investors to realize that they are in control of their own financial destiny and that the decisions they make will determine their success.

Graham identifies five sources of advice for investors:

• relatives or friends who are knowledgeable in securities

• local commercial bankers

• brokerage firms or investment banks

• financial services or periodicals

• investment counselors.

He notes that each source can provide useful information, but investors must be careful to consider their motives, knowledge, and credentials.

Graham cautions against relying solely on the recommendations of financial services, which he believes often cater to the desire of investors to be told what to do rather than providing valuable information. Instead, he recommends that investors use financial services as a source of information and suggestions.

When it comes to working with brokerage houses, Graham advises investors to be clear about their objectives and to avoid being influenced by speculative considerations.

He notes that brokers are often paid on commission and are biased toward speculative-minded advice. Investors should be explicit about their interest in investing rather than speculating, and brokers will respect this point of view.

Finally, Graham discusses the role of investment banks in the investing process. He notes that investment banks can direct money to markets with potential for growth and a positive impact on society. However, he advises investors to be cautious and to consider the motives of investment banks, which may be influenced by their desire to make profits for their own firms rather than for their clients.

Overall, Graham emphasizes the importance of being an informed and discerning investor. Investors should seek advice from a variety of sources, but they must also be careful to consider the motives and knowledge of their advisers. The Intelligent Investor is in control of their own financial destiny and must be diligent in making informed decisions.