Category: DIY Investing
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:
In “Chapter 4: General Portfolio Policy: The Defensive Investor” of The Intelligent Investor, Benjamin Graham introduces the concept of a portfolio policy, which is a general guide for making investment decisions.
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.
Recently, a reader pointed me to How To Retire Early: Your Guide to Getting Rich Slowly and Retiring on Less by Robert and Robin Charlton. She mentioned this book is an example of the type of information that can be helpful to readers as they pursue and achieve financial goals.
According to the book and its charts, the authors accumulated over $900,000 (on a relatively modest combined income of less than $100,000 per year for most of their investing years), retired early at age 43, and began traveling the world. You can see where they’ve been at Where We Be and learn about their investing, frugal living, and retirement journeys.