Law 1: Always and inevitably everyone underestimates the number of stupid individuals in circulation. Carlo Cipolla, The Basic Laws of Human Stupidity This may seem like an uncharitable exaggeration, but one is repeatedly surprised by how individuals that you once considered intelligent turn out to be unashamedly stupid. And one is also surprised to see … Read more
The Book On The Taboo Against Knowing Who You Are is a book about the latest societal taboo. Sexuality and religion were the previous taboos. The biggest danger today is self-knowledge – a state of wonder at who we are and where we came from. Watts admits that there are subversive secrets in the Bible … Read more
Most investors are novices and make many mistakes. Drawdowns, high fees and expense ratios, and improper diversification are all common problems they face. Advisors should be hired only if they are proficient and conservative. A lot of bad advice is given for free. Investors should expect to pay a fee, but the advisor should never … 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
It is important to learn about the history of the stock market, so that you understand how stock prices are related to earnings, cash flow, and dividends. The price of a stock changes, according to real growth (company’s earnings and dividends), inflationary growth, and the amount of speculation (up or down). The PE 10 ratio, … Read more