Thinking ahead about how investing can support financial goals is the purpose of planning. Naturally, there’s lots of talk about common planning targets: retirement and college. But there’s also consideration of how to achieve multiple goals at various stages of life — whether covering basic needs or leaving a legacy — and how taxes and tax planning could impact results. Articles in the planning category allow you to clarify how today’s decisions can impact efforts to grow, manage, and maintain wealth.

What to Do with Company Stock

Accumulating company stock has been a good way for my family to build wealth. I’ve heard others say they’ve been able to generate income by buying shares at a discounted price and then selling shares at a higher price. In this way, they may have more money available to pay off debt or invest, increasing their net worth.

I won’t argue in favor of or against the inclusion of company stock in an investment portfolio. But we’ve decided not to hold company stock forever. Here are a few things we’ve done with the shares:

Why 401(k) Default Options May Not Be Enough

I’ve been reading Misbehaving: The Making of Behavioral Economics by Richard H. Thaler. A point of interest is the discussion of automatic enrollment in 401k plans. Automatic enrollment may get employees started saving for retirement. But 401k default options associated with this type of sign-up (such as an investment choice of a money market fund and a savings rate of 3%) may be unlikely to help employees achieve the outcomes needed for a comfortable retirement.

According to Thaler, “Both of these default choices — the money market investment option and the 3% savings rate — were not intended by the employer to be either suggestions or advice. Instead, these options were picked to minimize the chance that the company would be sued.”

So, what’s the story about these default options?

Market Fluctuations: How to Act When They Happen

Chapter 8 of The Intelligent Investor focuses on dealing with market fluctuations. Graham opens this chapter advising investors to know about the possibility of these ups and downs. He urges us to be prepared financially and psychologically.

To be clear about the nature of potential fluctuations, Graham describes a probable set of circumstances. Within the next five years, shares of a given security may experience a 50+% price increase from its low point or a 30+% decline from its high point. Such changes in stock prices may bear no relationship to changes in economic values.

While the rise in prices sounds great, the decrease seems scary. Still, it’s this scenario for which Graham wishes to equip investors to withstand (and possibly profit from). He offers advice that I interpret in this way:

Understanding The Intelligent Investor by Benjamin Graham

I am collaborating with Joseph Hogue, Chartered Financial Analyst (CFA) on a chapter-by-chapter review and analysis of The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham.

We are reviewing the latest edition of the book that contains a preface by Warren Buffett, billionaire investor and Graham student, and commentary by Jason Zweig, a financial journalist who now writes a column for the Wall Street Journal. This edition covers investment history and Graham’s insights on current events through 1972. Zweig’s commentary is more recent, written from a 2006 vantage point.

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