In the mind of Ben Graham, author of The Intelligent Investor, and teacher of star pupil Warren Buffett, his thinking was to build a margin of safety into a portfolio. In addition, Buffett recalls that Graham taught that it was OK to go against the grain and avoid the crowds. And that being well-rounded in life was good for your body and soul. As my father-in-law Dick Young says, investing is more art than science. And finally, live a life of generosity—that does not necessarily mean with money, but with your time. In The Intelligent Investor, Graham wrote, “In the old legend the wise men … [Read more...]
Investing Habits of the Fairly Wealthy: #8 “Safety”
“History repeats.” “It’s different this time.” “Real estate always goes up.” “I’m a long-term investor.” “I’m a contrarian.” I remember “It’s different this time,” back in the late 90s when investors were partying in tech stocks like Prince’s song “1999.” Then the tech bust happened, and serious money was lost, never to be seen again. “Real estate always goes up” was true right up until the financial crises in 2008, and once again, money was lost, never to be seen again. I could go on. And I will. “I’m a long-term investor,” I hear more than I care to admit. Then … [Read more...]
“No Pain, No Gain,” They Chant
What we’re seeing in markets is a repricing of risk—an often misunderstood four-letter word until it hits one’s portfolio. Risk is not a word Your Survival Guy even likes using because it implies dangerous stuff could happen. Risk control is more my speed. Your Survival Guy’s risk tolerance is most likely lower than that of most investors (and they might outperform), but I’m okay with that. The rah, rah, rah of the crypto bros, the look-at-me crowd, and the cocktail party big shots chant “No pain, no gain” in an upward-moving market. Then they wake up one morning and see the real … [Read more...]
Investing Habits of the Fairly Wealthy: #9 FTX
You don’t need to know a thing about cryptocurrencies to understand the bankruptcy of crypto-exchange FTX, or that the current trial of founder Sam Bankman-Fried is a story less about blockchain and more about human nature. These stories most often are. Because most financial disasters begin with a new technology and fail not because of the new toy but because of the people. That’s why investors need to have guardrails (to borrow a term from WSJ columnist Dan Henninger’s classic piece), in a world where there are fewer of them all the time. My first guardrail is this: I want you to work … [Read more...]
“Doctor, What Are You Doing?” “Nothing,” He Said
“The weather’s been crazy up here,” he said. “The crosswinds on the landing strip are the worst I’ve ever seen.” This was part of a conversation I had with a client yesterday. He spends weeks at a time fishing the big country of Alaska. He said the winds were so bad, guys he knows crashed their bush plane and, luckily, thanks to pilot awareness, walked away from it. He said that on the last trip, the fishing was excellent. It was the first time he could recall where they were the only ones on the river. They caught enough silvers (salmon) to feed them for the rest of the trip. “But,” he … [Read more...]
“Oh, This Is Prime Real Estate,” They Say
Are you hearing about the real estate debt you can buy and get ten percent on your money? I am. No, thank you. I hear it all. I’m Your Survival Guy. I get the offers, too. I don’t like risk. I’m fine collecting the interest on the full faith credits in treasuries. It’s funny (not that funny) how, not too long ago, in a zero percent world, two percent was a decent deal. Now, everyone wants more. Not me. I want my money-back guarantee. I don’t want “great deals” in my portfolio. I remember the brutal markets where it all fell down. “Oh, this is prime real estate,” they say. “It’s … [Read more...]
Investing Habits of the Fairly Wealthy: #10 Powerball
Your Survival Guy knows a lot about highly successful, fairly wealthy people because I talk to them. On the flip side, I know plenty about those who’ve won and lost a fortune. I know about the guy who can’t hold onto his money. He just spends every penny, afraid it might be gone tomorrow. And sure enough, it is. I also know all about the billionaires thanks to the real estate sections, the virtual tours of their homes, the shows on Netflix and HBO, and the books by Walter Isaacson. Plenty of drama to go around. Entertaining. Maybe not the best family life. That’s why when I say I’m … [Read more...]
“You Didn’t Eat That Again, Did You?”
As Your Survival Guy, I understand the immense pressure you’re under to “do something.” Everyone’s got a plan of what to do with your money. I know this not because you tell me what they’re telling you, but just from experience. I know, for example, when you’re asking me, “Why are we holding this position?” It’s usually the one that’s down the most. That’s human nature. But instead of looking for the exit, sometimes it’s positions selling at a deep discount that deserve additional money. I know you’re being tempted. I see the attractive teaser rates, annuities that promise a lifetime … [Read more...]
The Single Worst Market Timing Event in History
Attempting to time the market could be the most popular mistake among market participants. Here’s what I wrote about market timing back in January 1997: Panic!... History has been made. Since the exact summer Dow low of 5346.55, the Dow has soared an amazing 21.9%. Never in stock market history has the Dow added 1,000 points so fast. As a cap to the monster four-month surge, the Dow Jones News Service headlined a lead story with, “November Point Gain Was Largest Ever for the Dow.” To anyone who was foolish enough to sell stocks in front of this tidal wave, the bailout goes down, in terms … [Read more...]
Wellington and Wellesley Funds Not Managed by Vanguard
In my conversations with you, we talk about the virtues of being a balanced investor. You can achieve this through a mix of blue-chip dividend payers and laddered bonds. To illustrate, I’ll use as a proxy Fidelity Balanced, Vanguard Wellington, and Vanguard Wellesley funds. In that order, they have roughly the following stock/bond allocation mix: 70/30, 60/40, or 40/60. (Note: Wellington and Wellesley are managed by Wellington Management in Boston, MA, not the Vanguard Group.) For more, read the P.S. below. With the Federal Reserve deciding to hold rates steady yesterday—they’ve made … [Read more...]
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