Categories: Investment

My Philosophy Behind Investing as Learned from Benjamin Grahan

This post will mainly be quotes (in italics) from Benjamin Graham’s book, “The Intelligent Investor.” I hope they do a great job portraying to you my overall investment philosophy.

Basics of my Investing Philosophy

1. If you speculate you will (most probably) lose your money in the end

2. Buy when most people (including experts) are pessimistic, and sell when they are actively optimistic.

3. Investigate, then invest.

The investor and stock-market fluctuations

Buying stocks means buying a worthy business and the markets ups and downs are people’s speculative emotions and do not reflect the value of owning a business.

Buying and selling stocks as if you are buying or selling a business based on current numbers and values instead of future speculations is a much better strategy.

Since I plan to be the typical investor, I shall will always be buying into the market except when prices are over a standard that I shall set.

Investing takes much more fortitude than intelligence.

As I said above.

Why my investing philosophy causes me to invest in indexes

Benjamin Graham changed his idea that cheap securities could be found as he grew older. He believed that with all the information out there in today’s more modern economy, the market price reflects the actual price of the company. This is known as the efficient market hypothesis.

I somewhat agree with the efficient market hypothesis.  I still believe that people’s tendency to speculate about the future causes the market to swing in different directions. As a result, I will always in the future have a higher percentage of my invested money in stocks when people are negatively speculating and a lower percentage of my invested money in stocks when people are positively speculating.

As a result of this philosophy, there is no point in trying to pick the winners and losers of stocks.

Closing Thoughts

This means that I should be happy with average market results, though I do have a couple strategies that should allow me to slightly out earn the general market.

Do you have any investing philosophies that shape the investment choices that you choose?

Categories: Investment

Investing Plan

This is my overview post on investing. It is a great starting post for you and in it you will be able to find many links in the future to posts that go into more detail and results of how well the plan is working.

I always enjoy thinking about investing money and I have played with small amounts of money in the past which looking back on it, it may not have been the smartest thing to do. I did learn along the way though and haven’t lost money. In light of this, I want to write out my investing plan for the future and then in subsequent posts, I will go into the details on why I made the decisions that I made.

Overall Philosophy

I believe that I cannot out pick others on which stocks are best to buy. I also believe that 90% of the population cannot do this either. This is why I will invest in indexes (an index is a whole bunch of stocks/companies with certain criteria that you can invest in at once). There will be some picking and choosing on which indexes I invest it.

When I put my money in, I will leave it there because I believe it is almost impossible to time the market. Buying when the general mood of the people is fear and selling when the general mood of people is positive, but this is difficult. Because of this, once I buy into an index I will stick with it. I will skip out on trying to tell when people are overly optimistic about the market and therefore sell my securities. I do figure thought that if I am going to by buy whole indexes anyways, I can at least attempt to pick one that is overly gloom and doom.

Portfolio Allocation

Holding Period1 Year5 Years10 Years30 Years
Percentage of portfolio invested  in Stocks50%61.6%88%116.2%

I will go into the details of how I came to this conclusion at a later date. You will be able to find that link here when I do.

Stock Selection

This probably could be the most fun part, but because all of stocks as a whole beat 80% to 90% of professionally managed funds, I will not be picking individual stocks. Instead, I plan on investing in etfs, or exchange trades funds. These are mutual funds that are traded on a stock exchange. They have certain advantages and disadvantages that I will talk about in the future.

I will be investing in 4 different etfs.

Vanguard Small-Cap Value ETF (VBR)

WisdomTree Emerging Markets SmallCap Dividend Fund (DGS)

WisdomTree International SmallCap Divident Fund (DLS)

SPDR S&P 500 (SPY)

I will lay out why specifically I chose these stocks in the future along with how I will allocate between them.

Bond Selection

When I am investing more on a short term basis, I will follow the allocation listed above and the money I do not have in stocks will be spread evenly in these bond funds. I will add to this as time and situation requires as bond rates change and are at historically low prices right now. These two funds are a good start and you will be able to find why I picked them here in the future.

iShares 20+ Year Treasury Bond ETF (TLT)

Vangaurd Intermediate Term Bond ETF (BIV)

How much to invest

I’ll have to admit that this is the area that I am the most unsure of now and that is because I am still a college student. One thing I do know is that I want to spend my money on assets and not liabilities as I receive money. Once I get to this point in my life, I will re-write this section of my investing plan and maybe a whole separate post expounding on it.

Final Thoughts On My Investment Plan

The goal is not to become rich or to hoard money for myself or to store up treasures here on earth. The goal is to be wise with my money and make use of what I have been given so that I can better help others. I hope I actually do this. Peace out.

What advice would you give me?

The Value Geek 2019