Tulip Mania is known as a primary example of a bubble. The Beginning of Tulip Mania It all started in Holland, in the seventeenth century. Years before (in 1593), a botany professor from Vienna brought to Leyden, a city in the Dutch province of South Holland, some unusual plants from Turkey. The Dutch were fascinated … Read more
The Intelligent Investor by Benjamin Graham is often cited as one of the best books on investment, most notably by Warren Buffet. Graham lays the foundation for laymen by giving a sound approach to investment, written with simple language that is easy (albeit dated) to understand. You are presented with Graham’s personal investment philosophy and … Read more
Range: Why Generalists Triumph in a Specialized World by David Epstein argues that instead of aiming to hyper specialize, more people should be trying to gain multi-disciplinary experience. Instead of planning and implementing, they should be testing and learning. Specialization is necessary, but only after a sufficient test period. In the past, people had to … Read more
Investment funds are vehicles provide a convenient means for saving and investment, and potentially protecting investors from themselves. But the investor should expect no more than average results. But beware of high fees, excessive trading, and erratic fluctuations in performance. Be wary of outperformance, it may indicate speculative behavior on the portfolio. The defensive investor … Read more
Mr. Market is the analogy given for the market. Imagine that you co-owned a company with Mr. Market, a man who, each day whether he is a good mood or in a bad mood, will buy or sell his shares in the company. The analogy is to make the point that irrational investment is a … Read more
An enterprising investor wants to achieve a higher than average rate of return. There are 4 ways in which this type of investor can go beyond the defensive investor. . Buying in low priced markets and selling in high priced markets, buying growth stocks, buying bargain issues, and buying “special situations”. The enterprising investor can … Read more
Unless lower rated bonds and preferred stock have a huge upside, enterprising investors should avoid them. Lowe rated securities usually collapse in adverse markets. It is good to avoid foreign bonds. But ETF’s have mitigated for this problem, so do mutual funds that specialize in foreign bonds and lower-rated securities.
As long as the stock is not overpriced, buying them could protect against inflation and offer a higher return than bonds or cash in the long run. Four rules for the defensive investor. Adequate diversification (between 10 and 30 issues) Large, outstanding, conservative companies (top 30 percent of industry) Each company should have 20 years … Read more
The conventional wisdom is that the investor should match the amount they risk with their risk tolerance. But Graham says that the amount of risk that is taken should depend instead on the amount of intelligent effort the investor is willing and capable of expending and doesn’t depend on age either. The defensive/passive investor should … Read more
Keep investments and speculation separate. If you must speculate, make sure it is no more than 10 percent of investment funds. There is intelligent investment, but also intelligent speculation. Intelligent investing includes: 1) analyze soundness of business’ fundamentals. 2) a plan to prevent catastrophic loss. 3) pursuit of reasonable return. To speculate means to bet … Read more