I started rereading The Intelligent Investor this week and wanted to share a quote. The discussion revolved around the view at the time – this was about 1970 – that investors should consider an all-stock allocation due to the worry of higher inflation.
Of course, there’s always something to worry about and Graham’s answer fits a broader allocation question that gets asked all the time – should I own more or less of something else because of the worry of the day?
We must deal here with two different time elements in investment results. The first covers what is likely to occur over the long-term future – say, the next 25 years. The second applies to what is likely to happen to the investor – both financially and psychologically – over short or intermediate periods, say five years or less. His frame of mind, his hopes and apprehensions, his satisfaction or discontent with what he has done, above all his decisions what to do next, are all determined not in the retrospect of a lifetime of investment but rather by his experience from year to year. – Ben Graham
We’re armed with the latest and greatest data telling us the best course of action for every situation. There’s just one minor, yet very important drawback.
It’s imperfect.
The best course of action is generally long term in nature and works best over decades. Yet, investors are blind to its impact from one year to the next.
Simply, you can’t expect long-term averages to occur over very short periods of time.
Last Call
- It’s Never A Perfect Time To Invest In Stocks – FMD Capital
- Tanking – New Yorker
- Even God Would Get Fired as an Active Investor – Alpha Architect
- Why We’re Terrified of Typical – M. Housel
- How Does a Change in Shares Outstanding Impact Stock Returns? – Fat Pitch Financials
- Do Defensive Sectors Outperform in Down Markets? – FactSet
- Seth Klarman Explains What Makes a Successful Investor – Business Insider
- Invest like a Legend: Steve Eisman – Globe & Mail
- Are US Stocks Overvalued? – O. Blanchard
- Pay Attention to the Dullest Economic Indicator – R. Dalio
- The 100 Jokes That Shaped Modern Comedy – Vulture
- Offer: Get Your Taxes Done Early and Save with TurboTax