The Intelligent Investor

I recently read Benjamin Graham's book, The Intelligent Investor, which is widely regarded as a foundational work on the topic of investment strategy - as much for my own edification as for knowledge of the financial services industry. I'm rather sorry to not have read it sooner: many of the principles of investment that are taught on the basis of "because I say so" can be traced back to this work, where the author provides ample evidence to support them.

In addition to providing solid advice for securities analysis and portfolio management, Graham calls into question the practices, and the very ethics, of the financial services industry: which has for so long been guilty of unscrupulous practices and unsound methods that it's a wonder there's a shred of dignity left in the profession. Though that's likely posturing, as advocating any practice requires denigrating those who do otherwise, it's also likely well justified.

But to salvage something of value from the general negativity of his opinion, it's that the demand for a financial services firm that truly does a service to its clients is still very much unfulfilled for the majority of investors. Those who have amassed portfolios of $1 million or more are highly desirable, and by most accounts well served, by wealth management firms - but for the rest of us, it seems we're left to the hands of firms that will gladly charge a commission for trades on which they provide no guidance at all, and the advice of those who claim to know the secret of making fortunes in the stock market, in spite of their own demonstrated inability to do so for themselves.

Ultimately, this situation practically guarantees that very few investors will ever amass much wealth - and those few that manage to do so on their own will be very much in the position of the Little Red Hen, who having toiled on her own to plow the field, plant the harvest, pull the weeds, and so on suddenly finds herself beset by "friends" who are ready to pitch in when all her efforts have produced something they wish to help consume.

I had a finance professor who once demonstrated how an individual who earns minimum wage can, over the course of their lifetime, amass enough wealth to retire a millionaire (given a modest raise each year and a reasonable rate of return) - yet know of few people who make considerably more that are on a path to the same destination, so the need is there, but the supply is lacking.

Perhaps I'd feel heartened if I saw one finance site that placed a flag beside the ticker symbols whose stocks were grossly overpriced, or tossed up an "are you sure about that" message when an investor buys a questionable security, rather than merely collecting a commission on a purchasing decision that's almost certain to have disastrous results.

But this would also be a sign of a long-term perspective, the absence of which I have often commented on topics related to customer service and business management in general. It's something I remain devoted to, but something I feel little hope of ever witnessing.