I continue with summarizing Graham’s book The Intelligent Investor and today we touch on a very delicate subject: The Investor and His Advisors. As I offer stock market research services you can put me into both the investor and advisors group. Let’s first see what Graham has to say and then discuss the current environment.
- Seeking investment advice
- Differentiate between stock market forecasts and business forecasts
- Advice from brokerage houses
- Graham on investment bankers
Charlie Munger: Invert And Use “Disconfirming Evidence”
The Intelligent Investor - Book Summary - Investment Advice
Fellow investors we continue with our summary on Ben Graham's book The Intelligent Investor. The key book for investing and today we're going to talk about a very delicate subject especially for me investors and their advisers so how much investing advice should you have. And should you have investment advice. The topics are seeking investment advice differentiate between stock market forecasts and business forecasts or analysis advice from brokerage houses investment bankers and then we'll conclude with always Graham's main message. So the first topic is seeking investor investment advice. Now there are two kinds of investment advice you can seek. Graham says that first the person that doesn't know a lot about investing should seek investment advice not to do stupid things. So if you have if you want the average return good bonds stock market index then if you get the advice that tells you OK do this and don't do stupid things. Let's say that 25 percent 75 percent bond stock allocation that Graham promotes and if you are a defensive investor if you don't go into doing stupid things then you will do well over time but you will do average you will have a good return probably now around 3 4 percent over the long term which is very good for a lot of people. So those people should need should find trusted advisers that will keep things stable over time. The second thing and here is where things really can go wrong. And that's looking for investment advice giving money to somebody else or trusting somebody else's opinion for better than average returns.
And here I come here on a delicate delicate spot because I am having an in research firm that looks for better than average investment returns. So Graham would say don't do that especially if you're a defensive investor. So Graham would say take specialized investment advice only if you understand and it saves you time in doing research so you'll come to understand what are you doing. You cannot let others make decisions. You can use my research but you have to be the one that makes the decision. So you can use my research my experience my opinion but you have to have enough knowledge to understand what's going on and what is the risk reward. If you are an investor or a defensive investor that okay here is offered 4 percent and then I come and say okay we'll do 10 12 percent and then you blindly follow what I do without understanding that something that the Graham is against.