A funny coincidence happened today. I recommended The Intelligent Investor by Benjamin Graham to an acquaintance as the best book about investing. A couple of hours later, I stumbled upon a post about how that book is now irrelevant because the times have changed.
The post argues that while the general idea of passive investment is recommended in the book, a modern reader might draw incorrect conclusions. Passive investment, in Graham’s time, required buying individual stocks and bonds. Now, passive investment involves buying a couple of ETFs.
I was laughing at first. The book is obviously brilliant; it helps to deeply understand the nature of the stock market. Straight after I dipped a toe into this understanding, I realized how much attention and knowledge are required to achieve above-average results.
But maybe I am wrong and too rigid? I tried to decide objectively.
After finishing the book in 2021, I invested in a diversified portfolio where 30% was in bond ETFs and 70% in stock ETFs. The stock ETFs are tracking markets of different world regions.
The results:
Coupon and dividend income from bond and stock ETFs, respectively, were similar.
The value of all stock ETFs increased.
The value of the bond ETFs decreased.
There were even years when a bank deposit could outperform the bond ETFs.
It looks like the relationship between bonds and stocks has changed. The bond ETFs struggle to protect the portfolio from market falls. I am going to stay away from bond ETFs.
Please note, that this is just one case, I am not an expert in finances. So no investment advice here – only my takeaways for myself.
What about the book, then? I still recommend it as an amazing source of investor wisdom, but yes, now it could not be the only source.
