It’s been a rough week behind the scenes at Get Rich Slowly. My hosting company experienced unexpected trouble, which meant that this site was only intermittently accessible for the past three days. Meanwhile, I’ve been busy and had little time to write. Here are a couple of interesting articles that came across my desk recently:
Your Money or Your Life: Step Nine Revisited
Last Friday, I mentioned the Crossover Point, that point in time at which your investment income exceeds your monthly expenses. I learned about this concept from Your Money or Your Life. In the comments to that post, we discussed that the book’s admonition to buy bonds (and only bonds) seems outdated. Kristi pointed out that Vicki Robin, one of the books authors, posted an update to the book’s investment advice. Low-risk, socially responsible mutual funds are now considered a keen alternative.
A Conversation with Benjamin Graham
Here’s a 1976 interview with Benjamin Graham, perhaps Warren Buffet’s most important mentor. Graham discusses the difficulty of investing to beat the stock market, and offers two suggestions for individual investors to find valuable stocks. Among his advice:
- The individual investor should act as an investor, not as a speculator.
- The investor should have a pre-defined selling policy when purchasing individual stocks.
- The investor should split his portfolio between stocks and bonds, always holding at least 25% of each.
Index funds are the best choice for most individual investors, but if you want to purchase individual stocks, you could do worse than to take the advice of Benjamin Graham.
This article is about Spare Change
The difference between an investor and a speculator seems mainly to be a matter of how much risk the person can accept and quickly the person plans to take a profit. Fear of being called a speculator (even if only by yourself in your own mind) should not be a reason to make a particular investment or not.
I guess I just don’t like the transformation of “speculator” into a four-letter word, even if there are grounds for it. It’s verging on mob behavior. The fact of the matter is that even a speculator is far ahead of most Americans in investing at all.
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Here is the exact quote from the Intelligent Investor where Ben Graham defines the difference between an investor and a speculator:
“The individual investor should act consistently as an investor and not as a speculator. This means… that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money’s worth for his purchase.”
-Benjamin Graham
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I’m concerned about these index funds that mirror the major indexes. They contain tons of terrible companies (like Exxon, Monsanto, Nike, etc.) that are causing massive problems in the world. Why are we giving our money to corporations that are causing deaths, global warming, tainting the food supply, using child labor and unsafe labor practices in the developing world, etc.?
While I very much respect Benjamin Graham’s investing strategies, I think we need to find ways to follow his guidance without investing in these horrid companies.
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