I recently completed all 500+ pages of The Intelligent Investor (2003 edition with Jason Zweig). It turned out to be everything that I expected it to be: a collection of sound advice that was well-researched, with all of the main points supported by clear examples and strong logic.
The Jason Zweig commentary following each chapter was welcomed support to what might otherwise be a harder to follow book from a much older generation.
There are no good stocks, only good prices
This was my big takeaway…the key message from the book and one that I needed to hear, when I needed to hear it. It sounds so simple – only buy something when the price is right. As Benjamin Graham rightly points out, Mr. Market is not rational. This could not be anymore evident than it is today as the stock market has been on an absolute tear since it reached bottom in March of 2020. Many of the drivers of investor enthusiasm are well placed making the market’s run-up easy to digest. Now, will it continue to make sense should it continue to blow through the roof?
That’s worth a discussion over beers. At the end of the day, you can’t predict the market.
Hot, hot, hot
I recently changed companies and as part of that transition, I rolled my old 401k, profit sharing, and employee stock ownership plans into a rollover IRA. Thus, I had to exit an incredibly hot market, forcing me to contemplate how best to get back in. I found it quite enticing to start gobbling up the names of some of my favorite companies and brands that I regularly patronize…an urge I knew I must resist.
While it’s a good place to start, due diligence would be required if I were to pick up the new habit of selecting individual names rather than sticking completely with index-based ETFs.
This brings me to my next point.
Speculation
The darlings of today on Reddit’s WallStreetBets will quickly be discarded tomorrow, a vicious cycle of speculation that would likely make Graham sick. His distinction between the speculator and the investor is timeless and ubiquitous. What I was surprised to discover was that he left room for the individual to be both…within reason.
Proportion is the key and knowing which state you’re acting in is critical to ensuring you don’t gamble away your retirement.
In this moment of personal financial transition, I regularly stop and think, what would Mr. Graham do?
My managed investment plan and my Roth have done exceptionally well during the recent run-up. My friends have done quite well, also. When I ask about what they were going to do about it, they say the profits would be eaten up by taxes. Stalemate! My point to them was that it’s all ‘funny money’ anyway and the market absolutely won’t sustain this growth in my opinion. We are all in the investment game short term, obviously in the November or December of our years.
(Apologies to Frank Sinatra.) It has been enlightening to watch these investment funds rise and fall over the forty plus years of their existence.
My best guess on what to do with them is just let them rise and fall and set them up where my heirs can take the quarterly interest and dividend payouts and just let the base continue to follow the market.