The Intelligent Investor in 2026: Outdated or Timeless?

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3:07They actually got me into reading stats for anything. You're tuned in to the Investing for Beginners podcast. Led by Andrew Sather and Dave Ahern. Step-by-step premium investing guidance for beginners. Your path to financial freedom starts now. Starts now. All right, folks. Welcome to Investing for Beginners podcast. Welcome to 2026. Today will be the first show that you will hear us in 2026. We hope you had a great holidays and a happy and safe New Year's Eve. And welcome to the show and the stock market. And let's get to learning more about investing. So today we thought we would talk about the intelligent investor.

3:51I know I hear all the groans out there. Oh, why are you guys talking about that tired old book? I know it's become in vogue to bash the intelligent investor and put it down. And while yes, maybe some of the formulas are maybe not up to date. The core principles behind this book are timeless. And our good friend Warren Buffett, Ben Graham's most famous student, he is quoted as saying, is by far the best book on investing ever written and credits chapters eight, Mr. Market, and chapter 20, Margin of Safety, as the most important books or chapters in stock investing writing. So I think this is, I always do a re-listen of The Intelligent Investor every year in January.

4:39So Andrew and I thought it would be appropriate to touch on some of the timeless themes that you can learn from the book. So with that, I'm going to turn it over to Sir Andrew and we'll start talking about The Intelligent Investor. Yeah, this was the second book I ever read about investing. And it really shapes the way you think about investing. And then the way that it shapes your investing comes through in your mindset, your ability to handle your emotions. All these things that happen in the background that you're not aware are happening, they happen when you set the foundation in place. And so The Intelligent Investor is a foundation book for so many people.

5:23So I don't care what you think. If you think it's outdated, you're wrong. And if you don't understand these fundamentals, you're not going to be a good investor. Maybe you will one day, but you're going to make a lot of mistakes along the way, and those could be painful. So why not dig the foundation now? One of the first topics that's mentioned in the Intelligent Investor, which sounds basic, but maybe there's a little more to it. This idea of investing versus speculating. Lay out some of the mind frames, some of the ways people think about those two ideas and why you shouldn't try to mix one with the other.

6:04Right. I think most people, when they think of the stock market, especially people that are newer to investing or the stock market, kind of think of the terms as interchangeable. that investing and speculation kind of go hand in hand. And it couldn't be further from the truth. And a lot of it is because people associate investing with gambling. They feel like it's gambling because there's lots of price movements. You hear all these stories of people making millions and losing billions. And so it just seems like this wild, wild west. And while there is some aspect of that, depending on how you invest, The vast majority of the money moving in and out is actually a fairly structured, organized manner.

6:49And it is guided by emotions. So that also kind of leads to some of the volatility that you're going to see. But the easiest way to break it down is investing and speculation. Investing is a term that you would use when you're doing any sort of analysis or trying to learn about the business that you're going to buy. That's investing. So when you buy a company, when you buy a piece of stock of Google, when you buy$100 worth of Google, you are now a shareholder of Google, and that is investing. When you are looking at the price and seeing it go up and down and trying to bet on whether it's going to continue to go up or whether it's going to continue to go down, that is speculation.

7:35because that is solely based on the price movement of the company, not the fundamental analysis, not trying to learn about what is this business? How does it operate? Why do people like it? Why do people hate it? And you're just looking solely at where the price goes and where you think the price is going to go. That is speculation. And they are two vastly different kinds of investing. There are people that can do the speculation part really well. I am not one of them and I don't want to be one of them, but there are people that can do it. It's a much, much harder way to invest. And there's not a lot of, what's the word I'm looking for?

8:13There's not a lot of solidity or stability to doing that. And that's where you usually hear of people losing their shirts is by trying to bet on, hey, I believe Palantir is going to go up to$300. And then they put their whole life savings into it and it doesn't. And then they get burned. So speculating is a much, much harder game to play. Investing does take some effort. It's not easy and there is no shortcut to it, but you have to learn the fundamentals of the business and understand why it does what it does and why people want to keep buying cheeseburgers from McDonald's. And once you can solve that, then it's a lot easier to figure out how well it's going to do in the future.

8:55And that's what investing is. And the intelligent investor, Ben Graham, focuses on the differences between these and why one is a better way to go than the other. Yeah, I love it. Perfect. So if we can pull on that for a second, let's say I'm a beginner. I don't know how to become an investor. Let's say I really like Nathan's hot dogs because I know they're a public company. Other than going to buy and eat some of their hot dogs, which is always a great idea. How can I learn about this business? What are some practical ways to learn about the business as an investor? The easiest way, I'll say easiest, is then you can access the information.

9:41There is going to be a little bit of effort required, and it's going to involve reading. You're going to have to go to... There's two main sources. One is you can go to sec.gov, and you can download something that's called a 10K or an annual report. This is something that the company puts out every year. It's a financial statement that they have to put out every year by law. And in that statement, they tell you everything you need to know about that company as a potential shareholder. You will learn what the company does, how they operate, the sectors that they operate in, maybe how much they charge for the things that they charge.

10:17You also find out the risks in investing in the business because there is no company, no investment that does not carry some risk. It'll also include what management thinks about the company and where they think it's going, what's happened. You'll also see the financial records and you'll also see some other maybe more minutia in things called footnotes where you can find more detailed information about different topics that could give you some insights into the benefits of investing in Nathan's or not. So you can find that at sec.gov. It's a 10K. The range is anywhere from 55 to 150 pages. Most public companies are going to be around the 100-page range.

11:03You get into banks, they're going to be a little bit longer because they have more regulations than other companies. And the other place you can look is most companies have what's called an investor relations tab. And so you could type in Nathan's Hot Dogs Investor Relations in Google. and then that'll take you to their website and then they'll have other information there as well as the sec.gov filings. So you can find all kinds of stuff and maybe even things that aren't in the financial statements will be on that website. And it's all gonna be verified, so it's good information. But those are the two places you're gonna wanna go.

11:37But the only way, I'm sorry, the only way to really learn about the company is you gotta read a 10K. And you have to learn how to read them. And once you do, then the whole investing world is going to open up to you and be your oyster. I'm going to ask a difficult question. If you're not the type of person who likes to read, do you think you shouldn't be a stock picker? If you are the person that doesn't like to read, should you not be a stock picker? I would probably grudgingly say you probably should not be a stock picker. If you cannot spend the time required to read through those financial statements, then I think investing in things like index funds or ETFs, things of that nature, your 401k, those are an amazing place to invest.

12:37Investing in stocks is a lot of fun. You can make a lot of money. You could probably make more money doing that than you can in an index fund. but there are a lot of index fund millionaires out there. And it's a great way to invest as well. And it really comes down to what do you want to do. But if the thought of reading a 10K and learning about how Google makes money leaves you cold, then maybe it's not for you. And that's perfectly okay. There is no, it does not demean you in any way, shape, or form. It just means that this is not something you're super interested in. And I'm not interested particularly in jumping out of an airplane.

13:15So does that mean that I'm a failure as a human? No. It just means that that's just not something I want to do. So understand what it is that you want to do and what you want to get out of this. And then decide what is going to work best for you. But don't give up until you try. You may actually like it. And it's not a race. So you don't have to read 100 of these things in a week. If you read$1 ,000 a month, that's doing better than most people, frankly. So just understand what it is you're trying to do and set expectations. That would be my suggestion. Yeah, if I could just throw my two cents in there.

13:53I basically forgot how to read when I was in my 20s. Not literally, but you know what I mean. Your priorities change. But I also learned I like to make money. So you'll be surprised how you can pick up that skill again. Hopefully you learned it in grade school, but you can pick that skill up again. And things that you would have never thought you found fascinating can become fascinating when there is the money element tied. And that doesn't make you a bad person either. There are psychological things that talk about how when you have skin in the game, when you have ownership stake in things, you tend to pay a lot more attention.

14:30and so to Dave's point if you try you just never know where it could go and I know for me the journey has been a lot of fun and hopefully I've gotten a little bit smarter so that part's up for debate let's move on to inflation how does inflation work does it lend itself to how does inflation work with the stock market the way I'm thinking of inflation is I almost need to be in stocks so I'm not losing to inflation. So as investors, what should we care about with inflation? Why is it doing what it's doing? I don't know. Any thoughts around inflation and stock market? Yeah. So I think a lot of people maybe don't totally understand the impact of inflation and why it could be very deadly to us as investors or just people that are trying to grow our wealth just as a general rule.

15:31And really it comes down to our buying power. Inflation erodes our buying power. When we buy, the common analogy is to look at milk or eggs or something like that. You buy a car or if you buy an iPhone today, the dollars that you spend to buy the iPhone today are not worth as much in five years because of the impact of inflation. Now, inflation right now is kind of a political hot topic, and I won't get into all the politics of it. But the big disadvantage for us as investors slash consumers is that our buying power is diminished. When we buy Microsoft, the dollars that we're spending today are going to be worth less in five years.

16:14And so what we're trying to do when we're trying to estimate what the value of a company like Microsoft is going to be is we have to take into account the impact of inflation. And the higher the inflation, the more we have to discount how much that value will be in the future. And so we have to try to estimate that. Now, keep in mind, these are all guesses. Nobody knows what's going to happen in the future. But when you have a fairly consistent inflation rate, the Fed's goal is always around 2%. And I think historically, they've done fairly well at keeping it at that range. What it is right now, you'll hear all kinds of arguments, and that's pretty normal in the economic world.

16:57One person will say it's this, and another person will say it's that, and they're all convinced they're right. And in hindsight, they turned out they were both wrong. So it can be a challenge to come to a conclusion. But the biggest thing is understanding that your buying power is deteriorated by the impacts of inflation. And the reason why investing in the stock market is, I wouldn't say safer, but a better bet in the long run for your money is because when you put it in a savings account, air quote, hiding it under the mattress kind of idea with Wells Fargo, and they're paying 0.05 % for your savings account, and you got$10 ,000 in there, you're losing at least 2 % a year leaving that money just sitting there.

17:44You would be better served buying something even a little more risky, like bonds or something along those lines, because kind of the evolution of investments, Stocks are generally considered better, the best returns, but they're also arguably the most risky. And then you have things like bonds or money market funds, which are, air quote, safer, but the returns are not as good. Then you have government funds, government bonds, which have lower interest rates, but are considered arguably among the safest. And then you have something like savings accounts or CDs, which are probably the safest, but they also give you the poorest returns.

18:24And so when we're looking at investing and how inflation impacts us, it impacts us by the buying power of our money. So if I put$1 ,000 in a savings account, in a bond, or in a stock, I'm going to get more return from the stock than I will from the savings account, which is going to hopefully overcome the potential risk of investing in putting the money in the stock market. And so that's kind of how inflation impacts our investments and why it's important to understand its impacts. Whatnot is quickly becoming the next big thing for you to pay attention to. And its success isn't even slowing down over time, but it's compounding faster and faster.

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21:38Check it out at einvestingforbeginners.com. Yeah, no, it's super good. And I like the breakdown of the different investment classes that we have available to us. How about businesses? Being an investor means being part owner of a business. So what is the effect of inflation to businesses and how do they handle it? And then how does that flow through to investors? Well, that can be a challenge too. So inflation from the top line can look good. So for example, if we saw this with the grocery stores, when the price of chicken goes up, it's a double-edged sword for a grocery store. So they charge more for the chicken that you and I are buying in the store.

22:28So the top line or the revenue growth on the financial statement, the income statement, looks great. Hey, the company is growing faster than it has been in the past. That's awesome. The double-edged sword is for investors, that part looks good. The double-edged sword is the cost of the chicken. So what they're buying it for has also gone up because inflation has been passed through to them from the suppliers of chicken. Let's say Tyson. Tyson is the one selling Kroger their chicken. I'm not sure if they do or don't, but I'm just using as an example here. So if Tyson sells the chicken to Kroger for more, then the margins, the profit that the company makes by charging more for the chicken may be the same or worse.

23:13And so now that's impacting the financials of the business because, yes, they are charging more. So they're air quote making more money, but the profits is really what matters because that's the money that they can use to expand and grow and reinvest and pay us a dividend and give us buyback shares and return capital to us as investors. And if the company's getting pinched on the inflation side because the cost of chicken has gone up and now their margins are lower, then what happens is that they have less money to invest. And then we as investors will look at the company and go, well, yeah, it's great that their revenue is going up, but now they had to cut their dividend.

23:57Or now they're not buying back as many shares or they're not reinvesting in the business and then eventually the business starts to slow down. Because they're not reinvesting. And so that's where the double-edged sword of inflation can really come back to bite companies in the public markets. And that's why we have to be cognizant of it. What businesses come to mind when you think of those that handle inflation really well? So a company, that's a great question. So a company that kind of springs to mind that would be top of mind would be a company like Costco. Costco has done a really, really good job of being able to withstand inflation over the many years that it's been in business.

24:41And they can do that in part because they have kind of a dual engine of growth. So number one, they have their subscription business, which is not impacted by inflation. and they encourage people to sign up for the subscription, which in turn drives profitability and it also drives revenue for the company. And it gets our butts in door. And Costco wants to get our butts in the door because they are able to work out really good deals with their suppliers that aren't negatively impacting. They're not beating up their suppliers for super low costs at the harm of the supplier, but they're also working at a fair price.

25:27And then the company has lower margins than most other retailers. And so what they're able to do is they're able to use their buying power to get better prices. And then they can pass that deal on to us as consumers. So when we go to use chicken again, we go buy chicken at Costco, we can buy it at either a lower price or the same price that we could buy it from Kroger, but it's a better quality chicken. And we also know that we're getting the best price that we can possibly get, and it's more consistent. So the pricing isn't going to fluctuate as much. You're not going to see sticker shock when you go to Costco to buy products because they're able to control the pricing of their products.

26:16And because they are so conservative on that aspect, then they can judiciously raise prices on things like their subscription gently. They don't do it a lot, but they do it every... Generally, I think they've done it every three or four years, but this last cycle was maybe seven years because of inflation, and they wanted to hold off to do that. But the company is willing to sacrifice some profit to generate longer-term returns for shareholders as well as their customers. And so that's why Costco is one of the better companies at really kind of dealing with inflation. So companies with unique business models and competitive advantages deal with inflation better generally.

27:03Yes. Cool. Awesome. Yeah, that's great. So another part of the book I'm going to move us along is there's a chapter called A Century of Stock Market History. and this is maybe a little bit shocking to some of you but there's actually history for the market that goes back before the internet I know, that's a crazy concept but there's a table goes back to 1870 it is now known as the S &P 500 but Kohl's standard 500 composite goes back to 1871 and then pricing data for the Dow Jones Industrial 1897 so if you ever wanted to know just how the cycles move over the years and get source data, you can pick up the book and I recommend you do.

27:54But in the table, they highlight different years where you see the decline in each of these indexes. So when's the last time we've had a decline to end the year? It seems like over a decade where we've had any sort of decline because even the COVID came up pretty quickly. you have declines of 28%, 38%, 33%, and it's like 1917, 1893, and then you can fast forward 1938, 1949. These are all, you have 55 % decline, 30 % decline, 1962, 29 % decline. So a long history of market declines interspersed with his long history of great increases in price. And so to me, it kind of shows that volatility is part of the game.