As you know from here, the first time I read The Intelligent Investor, by Benjamin Graham was in 1997 while working at Fidelity Investments. In Chapter 1: Investment versus Speculation: Results to Be Expected by the Intelligent Investor, Graham points out that anyone who buys a stock is not an “investor.”
In his 1934 book, another that I’m staring at in my office, Security Analysis, co-written with David L. Dodd, the authors attempted to define the term investment versus speculation. “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
Graham went on to explain that timing the market was just another form of speculation. He also advised against having all your money in just stocks or bonds, suggesting a mix of 75-25 in stocks or the reverse depending on your objectives and/or current market conditions.
Your Survival Guy will point out that stock markets have been on quite the ride. Much of the gain has been from investors valuing stocks higher or as high as any other time in history. On the flip side bonds are offering yields we haven’t seen in a generation. As Graham would suggest, maybe start from a mix of 50-50 and fill in the gaps from there. But be careful, being too invested in stocks can simply be false hope.
Action Line: If you want help figuring out your optimal allocation, email me at ejsmith@yoursurvivalguy.com, but only if you’re serious.
Originally posted on Your Survival Guy.
