Novel Investor

Compounding investing wisdom...

Ben Graham’s Simple Strategy for Defensive Investors

by Jon

In January 1949, Ben Graham spoke before the New York State Bankers Association to encourage bankers to advise customers on sound investment policy. What surprised people then was his push for simplicity.

You can make investing as simple or complicated as you want. Simple strategies tend to require less knowledge, fewer decisions, and generally easier to manage. Complicated strategies tend to bring added costs (higher fees and behavioral costs) and can introduce unknown, often uncompensated, risks.

Graham’s simple strategy: divide your portfolio between government bonds and a diversified basket of common stocks or “investment — fund shares — instead of a selected common stock list.” He purposely left out corporate bonds, preferred stocks, and the like, as unneeded risks for a defensive investor.

If you’re not familiar, Graham divided investors into two categories — defensive and aggressive — defined like this: Continue Reading…

Confusion De Confusiones by Joseph De La Vega

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Confusion De ConfusionesBuy the Book: Print

Joseph De La Vega’s Confusion De Confusiones is the earliest known book on the trading practices of a stock market. Set as four separate conversations between three people, you get a sense of what investing and speculating was like in the mid to late 1600s.

The Notes

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Some Book Notes

by Jon

Several years ago, I read Mortimer Adler’s How to Read a Book after seeing it discussed on Farnam Street. A book about reading a book sounds like a joke, I know, but it’s surprisingly not.

From an early age we’re taught to read, but not how to learn and fully understand something from reading. The book is an instruction manual on that process.

I won’t rehash it all here (read the book if you’re interested), but I was already doing part of that process like marginalia — highlighting, underlying, circling keywords, notes in the margins, etc.

I highlighted and underlined the hell out of that book but never bothered to summarize or go back through it to take notes. But I quickly recovered on the next book — marginalia, summary, notes, the works — and maintained some consistency after that. Continue Reading…

A Lesson From John Bogle

by Jon

John Bogle was truly a pioneer. Few people would forgo billions by passing it all back to customers as savings to be invested and grown over time but that’s what he did.

It’s impossible to ignore the common sense importance of avoiding high fees. Bogle’s cost matters hypothesis and battle against high fees did more for the average investor — past, present, and (likely) future — than anyone else ever. When you consider compounding, the savings he’s generated has to exceed $1 trillion. He, by way of Vanguard, transformed the industry. His legacy will be felt for generations.

Of course, Bogle was more than just a low-cost advocate. He was a long term advocate. He was a do nothing advocate. And he advocated for enough: Continue Reading…

How to Lie with Statistics by Darrell Huff

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How to Lie with StatisticsBuy the Book: Print | eBook

Darrell Huff’s book is about the long history of data deception. He explains the many ways data can be manipulated — to misrepresent facts, to tell a different story — in advertising, politics, and other areas and how to defend yourself from it.

The Notes

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