Comments on: The Intelligent Investor: General Portfolio Policy for the Defensive Investor

By: CashGiftsDirect

CashGiftsDirect — Fri, 03 Apr 2009 06:15:55 +0000

I agree with you 100% that intelligence and patient is the key to results. Without the both of them forget it. I am still learning a lot of things about stocks and bonds. For the fact that this was Warrens mentor, I think that I will try reading it.

By: WeSeed Writer

WeSeed Writer — Tue, 11 Nov 2008 17:39:24 +0000

This is a great book for people looking to get into investing. It’s a little advanced, but with Jason Zweig’s comments it makes it a little more digestible. And with your breakdown it makes it even easier.

By: Ranga

Ranga — Sat, 08 Nov 2008 04:00:05 +0000

I agree with ‘Writer’s Coin’. such a compilation would be a very valuable one.

By: Writer's Coin

Writer's Coin — Sat, 08 Nov 2008 01:36:03 +0000

Breaking down this book into these small, digestible pieces is gold, Trent. I would recommend that you package these up at the end and add the compilation to the Downloadables section. That book and that Downloadable would be something I’d recommend to any beginning investor or book club.

By: Rich

Rich — Fri, 07 Nov 2008 20:38:56 +0000

I think it’s important to define risk before you begin to invest.

In an ideal world you could increase your returns by accepting higher volatility. When “risk” is defined this way it is refering to systematic risk which is inherent to the market, vs nonsystematic risk which is the risk of an individual stock and all of the good and bad stuff that comes with it (management etc).

So higher risk from the stock market should theoretically give higher returns. Taking on a high risk stock (such as penny stocks) will not reward you with a higher return. Buying index funds, as you mentioned, allows you to easily diversify away most non-systematic risk, so now you only have to deal with market fluctuations. And I think this is where the bond-stock split comes into play for most investors.

By: George

George — Fri, 07 Nov 2008 19:39:51 +0000

@Faculties -

“It’s common to think that we could pick stocks that would beat the market — but look how often the pros are doing it — about half the time.”

I chart my investments vs. the S&P 500 (I make an entry in a spreadsheet each month as the statements come in) and know for a fact that I’ve outperformed that index over the past 11 years. Outperformed by 30% so far.

So it can be done and done more often than half the time.

By: Faculties

Faculties — Fri, 07 Nov 2008 19:20:59 +0000

It’s common to think that we could pick stocks that would beat the market — but look how often the pros are doing it — about half the time. My guess is that that’s how often, with careful study, we’d do it too — about half the time. An index fund gives the benefit of “about half the time” without all the sweat. Furthermore, it guarantees that our average will be no lower than the market average — something that picking your own stocks doesn’t guarantee. I’m just wary of that thing we all have that tells us all that we’re above average in savvy and knowhow — we can’t all be above average.

By: Kevin

Kevin — Fri, 07 Nov 2008 15:28:48 +0000

Sounds like we are in the same boat, Trent. I know I could do well by investing in dividend paying stocks instead of just doing the index fund thing, but I don’t think I have enough invested to make the extra time spent worthwhile. My biggest balance is the 401(k) which only allows investing in American Funds – which I’m no big fan of anyway.

By: Tyler @ Dividend Money

Tyler @ Dividend Money — Fri, 07 Nov 2008 15:27:49 +0000

Trent,
In respect your your last paragraph on dividend investing; you are correct in your statement about a company re-setting the dividend or “falling apart”.
However, with the additional aforementioned risk comes an upside potential not available with bonds or savings accounts and that is capital appreciation.
Of course Zweig is not comparing apples to apples in this situation, which is unfair to the reader.
He certainly should introduce the conept of Risk Adjusted Rate of Return which takes into account the risk relationship between the types of investments discussed.
This analysis levels the playing field, so to speak, and would provide the reader with a much clearer picture of the investment options.