Wife is "forcing" me to buy stock(s)

[bottlecap]

Tell her you don’t know the mechanics of it, either. Give her $3,000 and tell her to invest it herself.

JT

[Helo80]

That's a good point. If it's limited to $3k, it's a don't care. The question is will it be limited to $3k?

Yeah, that's definitely the risk --- people start double-downing when things get bad and lose more than $3k trying to make up the losses. You have to know yourself.

[tibbitts]

I'm find this thread more sad than amusing. I would say split up the finances so neither of you is involved in any way with the other's investments, and divide the household expenses equitably somehow. Effectively that means you'll be living on at most twice the lower of the two family salaries, which seems like a Boglehead kind of thing to do.

[Leesbro63]

My suggestion is to have her write down a full paragraph about each stock pick and her mindset into why she chose it. Could be an important part of the learning process, upon reflection later on.

[Chadnudj]

Why not create a "household index" consisting of the businesses your household uses and start buying those individual companies?

For instance, we have an AT&T phone plan, get our energy from ComEd (Exelon), shop at Target/Costco/Amazon/Jewel Osco (Albertson's), have Apple phones, drive a Ford and Toyota, utilize Netflix/Disney+, have PCs running Microsoft programs, bank with Chase....keep doing that for awhile (and particularly think deeply about it) and you can build a pretty decent/fun index of what your house uses. Then, when you pay your bills, you feel a little less bad since you're supporting the companies you're already invested in.

If it's fun money, that's a fun way to invest it.

[retired@50]

Why not create a "household index" consisting of the businesses your household uses and start buying those individual companies?

For instance, we have an AT&T phone plan, get our energy from ComEd (Exelon), shop at Target/Costco/Amazon/Jewel Osco (Albertson's), have Apple phones, drive a Ford and Toyota, utilize Netflix/Disney+, have PCs running Microsoft programs, bank with Chase....keep doing that for awhile (and particularly think deeply about it) and you can build a pretty decent/fun index of what your house uses. Then, when you pay your bills, you feel a little less bad since you're supporting the companies you're already invested in.

If it's fun money, that's a fun way to invest it.

I like this idea. With each dividend payment from the stock shares, it's like you're getting a tiny rebate on your household purchases from the last fiscal quarter.

Regards,

[dbr]

Aren't there famous stories of people throwing darts at the stock pages of the Wall Street Journal taped to the wall? That method would be my recommendation far and away.

[Sandtrap]

The thing about buying stocks is the impetus to sell, and repeat. And, the $3000 dabbling gets comfortable, so turns into $10,000 dabbling, etc.

Big debt and loss often started with, “its just a dollar”.

Read the wiki on “investing behavior”.

j

[goingup]

This happened in our household circa the year 2000. I was only interested in mutual funds, though not all index. My SO wanted Microsoft, Cisco, and GE. I bought $2000 of each and promptly lost 1/2 our money. Sold for a loss and that was the end of our individual stock purchases.

In the scheme of things it's not a big deal. Try making a mutual decision about how much to buy. Sit down together and make the purchase. Hopefully it's an interesting and fun experiment which doesn't go off the rails.

[Robot Monster]

Ten years ago if you invested $300K in a portfolio consisting of 99% Total Stock Market and 1% GE stock, you would be $14,229 poorer than if you just invested in Total Stock Market.

Source

That's the equivalent of pouring 3,898 Starbucks grande lattes (at $3.65 per cup) down the gutter, a veritable sea of wasted Starbucks.

[FrugalInvestor]

Actually we just decided to spend $3,000 on a stock pick; call it fun money. We pick up some shares of Apple. (I wish we were having this conversation 20 years ago.. ).

Yes, it's always much more effective to invest in the past. The future is very uncertain.

[refinedchain]

However, my wife has itchy fingers and wants to buy single stocks. But she doesn't really quite know about the mechanics, so wants me to do it.
...
I was thinking throwing it all in BRK.B, because that technically is a single company. Or maybe an actively managed Vanguard growth fund? Or just put it all in VTI, because she honestly has no clue about the ticker names. But that's kind of boring.

Think about options she can describe to her friends in 5 seconds:

• Ideally: a regionally HQ'd and high-profile company in your local community.
• Your GEICO idea is fine because it is a household name. Not VTI.
• One of the FAANG/Tesla/etc.
• A small biotech working on a cure to a widespread disease.
• Something she may not have considered - a local school board bond.

[MotoTrojan]

Pick bad ones and lose the whole $3000. It'll be a cheap lesson in the long run.

Can you expand on this strategy? I'd like to short it.

Lol. I can see them pick a net-net piece of junk and then get a 100 bagger... next thing you know they’re all-in on a single holding.

[aristotelian]

I would recommend a terrific little company called VTI. Same expected return as TSLA but much lower risk.

[Dave55]

Let your wife "learn" how to invest/buy stocks.

Dave

[MBB_Boy]

Advice from a Boglehead who also follows /r/WallStreetBets:

Stick $3K in a RobinHood account and install the app on her phone.

/jk

Just make sure to enable the diamond hands feature

[ADAMNOGGI]

Now, you might be initially thinking, "this guy's wife is making him invest his money." Fortunately, this isn't the case. Our strategy has always been (for now) just 90% VTSAX, 10% VTBLX and call it a day.

However, my wife has itchy fingers and wants to buy single stocks. But she doesn't really quite know about the mechanics, so wants me to do it.

She has given me (or herself), a budget of US$3,000 and wants to dabble. I've turned to you guys because, I honestly don't really know what to buy (which I feel is a good thing!)

I was thinking throwing it all in BRK.B, because that technically is a single company. Or maybe an actively managed Vanguard growth fund? Or just put it all in VTI, because she honestly has no clue about the ticker names. But that's kind of boring.

So, I thought to ask you guys about it. If you had $3,000 play money, and this really was play money, what would you do? If it gains, we get money. If it drops, it'll be a lesson to her to stop having windfall fantasies. Disclaimer, this doesn't affect our retirement strategy at all.

The problem is not "should I allow it"?

The problem is "what if she (you) is significantly successful?"

[smalliebigs]

I think some of you guys are just overthinking this, and quite pessimistic. What I hoped for a fun little discussion some have turned it into, "She's going to have a gambling problem."

Also, tibbitts, it's just a fun little game, it's not a prequel to a divorce

[Mr.BB]

Actually we just decided to spend $3,000 on a stock pick; call it fun money. We pick up some shares of Apple. (I wish we were having this conversation 20 years ago.. ).

Yes, it's always much more effective to invest in the past. The future is very uncertain.

The future is always uncertain. That's why I love Peter Lynch's saying "I’d pay an extra dollar for next year’s Wall Street Journal.”

[Cam894]

Your wife is the one with the itch, but you are the one picking the stock?

My thoughts exactly. Wants to buy stock, doesn't know where to start.

[tibbitts]

I think some of you guys are just overthinking this, and quite pessimistic. What I hoped for a fun little discussion some have turned it into, "She's going to have a gambling problem."

Also, tibbitts, it's just a fun little game, it's not a prequel to a divorce

For some people it just seems to work better when each person is responsible for his/her own spending and investing. Especially if both have somewhat similar income. Maybe that's you, maybe not.

[cheese_breath]

... She craves excitement and wants more volatility!

Maybe she should bet on the horses instead of individual stocks. Lots of excitement and volatility down the stretch at yesterday's Kentucky Derby. And those who picked the right horse made out like bandits.

...We're chuckling at the comments, especially the one that thinks I'm the wife in this scenario.

I've read several articles saying men are more likely to take chances with their investments than women.

[Mr.BB]

Nothing wrong with owning some individual stocks. What is worrisome is that "She craves excitement and wants more volatility!"

If your wife won't listen to you, then maybe she will listen to Warren Buffet...one of the best investors of all time.

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Buy when everyone else is selling.

Don’t buy when everyone else is buying. “Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance,” "The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying."

[yules]

OP this is an opportunity. 3k is going to be a great price for a lifelong learning opportunity. Start figuring out what's got her excited. Instead of just buying the stock, get her pumped up about short dated calls that are guaranteed to pay off 5x. Pressure her HARD to go all in, maybe even an extra 2k for Bitcoin and TQQQ. After the money disappears maybe she'll want to slow down a bit and keep following the Boglehead strategy that has worked well so far.

That's one way, to look at it, assuming she fails. But what if she succeeds and her investments make tons of money? Then your plan backfires, she thinks she has the magic touch or very good luck, and then tries to try her hand at stock trading with larger amounts of money. Except this time she isn't so lucky, but it's too late, she tasted success and thinks that her next winning streak is just around the corner, so she liquidated some tax advantaged accounts, and maybe borrows some money from a loan shark at usurious rates, confident that she can make all the money back. Then maybe she wins a few trades, feels her mojo back, just in time for another big loss. But it's too late now. She has sold the cars, pawned family heirlooms including his grandmother's wedding ring, in search of that big victory, and she promises to quit once she breaks even. But she never breaks even and then OP hears a knock on the door one day thinking thisis the Uber Eats lunch delivery and sees a very tall built man standing outside with a cooler and OP realizes that she has used his kidney (the left one) for collateral, and he has to escape out the back while there is still time. Now while OP is driving away, he has to dangerously use his phone while driving to download Tor, buy a fake passport off Silk Road, and bribe a stevedore to let him stow away on a freighter to Malaysia, where OP lives out the rest of his days. And due to the low cost of living, OP realizes that they could have just moved there at the very beginning and retired comfortably on the beach and saved themselves the headache of the past few weeks.

To summarize, OP, be careful because if you succeed in your stock picking, you may be headed for a hassle. With the global pandemic still happening, one way tickets to Malaysia should not be expensive, certainly less than the $3K you want to spend on individual stocks. Good luck.

[Annabel Lee]

I think some of you guys are just overthinking this, and quite pessimistic. What I hoped for a fun little discussion some have turned it into, "She's going to have a gambling problem."

Also, tibbitts, it's just a fun little game, it's not a prequel to a divorce

+1. Several excellent ideas on this thread if you ignore the pessimists, including the “household portfolio” concept and purchasing brands with which you are familiar.

Also for every unit of individual stock I buy, I purchase an equivalent amount of VTSAX... not a bad way to educate anyone about index fund performance & benefits.

[GrowthSeeker]

Let your wife "learn" how to invest/buy stocks.

Dave

+1
Here's a thought: have her open an account where it is possible to have a fake "paper account" with a lot of pretend money in it so you can practice making trades and see the results based on real live data. I used to have a TDAmeritrade account and I had a second account which was $100,000 of pretend money. I used "thinkorswim" interface to look at stock prices in real time, execute trades etc. A bit of a learning curve to learning the interface.
I don't know if TDAm. requires you to have a real account in order to have the paper money account or not.
I'm not sure what other places let you have a paper account for practice with totally realistic trading. There must be some.

[Thrifty Femme]

If either of you have access to an employee stock purchase program, but that stock at a discount and sell as soon as allowable.

[rkhusky]

Buy something she uses a lot. Then when she buys more she’ll feel like she is paying herself.

[retire2022]

Let your wife "learn" how to invest/buy stocks.

Dave

+1
Here's a thought: have her open an account where it is possible to have a fake "paper account" with a lot of pretend money in it so you can practice making trades and see the results based on real live data. I used to have a TDAmeritrade account and I had a second account which was $100,000 of pretend money. I used "thinkorswim" interface to look at stock prices in real time, execute trades etc. A bit of a learning curve to learning the interface.
I don't know if TDAm. requires you to have a real account in order to have the paper money account or not.
I'm not sure what other places let you have a paper account for practice with totally realistic trading. There must be some.

You can also simulate transactions short of actually executing bids, using a free Morningstar Portfolio Manager

https://www.morningstar.com/portfolio-manager

[burritoLover]

if she wants risky and volatile, buy NKLA - probably an exceptionally bad idea but million to one chance they could be the next Tesla.

[retire2022]

I think some of you guys are just overthinking this, and quite pessimistic. What I hoped for a fun little discussion some have turned it into, "She's going to have a gambling problem."

smalliebig check out this thread:

viewtopic.php?f=1&t=311580

In all seriousness, do you own research and you don't have to ask folks here, and perhaps unnecessary negative responses. See link above and see what others have to offer. Do not get discouraged, stay positive it is you and your wife money at the end of the day, do as you wish.

[nedsaid]

I'm shocked to wake up and see so much lively discussion!

So, maybe I'll try and address some of the questions with a background/context. The $3000 is about 1% of our current retirement fund. She knows about diversification/S&P500, the whole concept. Mostly because I mention it to her occasionally. She actively monitors and checks the performance of our investments. However, she finds it dreadfully boring! She craves excitement and wants more volatility!

The only issue here is, she doesn't know the exact procedure to purchase shares, so she just wants me to do it. In a way, this is her attempt to force me to buy individual shares because she's been bugging me to do it and for a long time my answer was, "nah".

She's leaning towards the companies she knows, such as Zoom, Apple, Alphabet, etc. Honestly, if she would just pick something and make up her mind I wouldn't even need to make this thread. She's the final veto; if she says $3,000 in Zoom, I'll do that for her.

We're chuckling at the comments, especially the one that thinks I'm the wife in this scenario.

Investing should be boring. Like watching grass grow, paint dry, or tumbleweeds tumbling. If you crave excitement there are better outlets for adrenaline junkies.

[Kookaburra]

Can you tell her you just got a hot tip on a stock called VTI, which stands for Verlant Technologies Inc?

[MN-Investor]

I own a small number of individual stocks mostly because I like the companies, they are mostly all local companies, and I just enjoy seeing how they're doing. They make up <5% of my portfolio so not a big deal. Individual stocks I own - 3M, Target, Hormel, Toro, Honeywell, General Mills, and Donaldson.

You should just buy the Mairs and Powers Growth Fund - they own MN domiciled companies and are more diversified than the list you have above.

My husband and I actually considered that a number of years ago, but decided that we would stick with either index funds or a small number of individual stocks. We've actually attended some stockholders' meetings of the companies we owned shares in. The Hormel stockholders' meetings have been fantastic!

[Mr.BB]

Ten years ago if you invested $300K in a portfolio consisting of 99% Total Stock Market and 1% GE stock, you would be $14,229 poorer than if you just invested in Total Stock Market.

Source

That's the equivalent of pouring 3,898 Starbucks grande lattes (at $3.65 per cup) down the gutter, a veritable sea of wasted Starbucks.

You could also say 10 years ago if you had pick 1% of AAPL or AMZN what would of happened to your portfolio? Let's face it, this conversation could go a 1,000 different ways.

[abuss368]

Your wife is the one with the itch, but you are the one picking the stock?

That is a good point. The wife could open a brokerage account and deposit $3,000 and be responsible for managing.

[abuss368]

I would also consider buying your wife a copy of Jack Bogle “The Little Book of Common Sense Investing”.

[cheese_breath]

I own a small number of individual stocks mostly because I like the companies, they are mostly all local companies, and I just enjoy seeing how they're doing. They make up <5% of my portfolio so not a big deal. Individual stocks I own - 3M, Target, Hormel, Toro, Honeywell, General Mills, and Donaldson.

You should just buy the Mairs and Powers Growth Fund - they own MN domiciled companies and are more diversified than the list you have above.

My husband and I actually considered that a number of years ago, but decided that we would stick with either index funds or a small number of individual stocks. We've actually attended some stockholders' meetings of the companies we owned shares in. The Hormel stockholders' meetings have been fantastic!

Ham sandwiches?

[pasadena]

Ten years ago if you invested $300K in a portfolio consisting of 99% Total Stock Market and 1% GE stock, you would be $14,229 poorer than if you just invested in Total Stock Market.

Source

That's the equivalent of pouring 3,898 Starbucks grande lattes (at $3.65 per cup) down the gutter, a veritable sea of wasted Starbucks.

On the other hand, if you had invested that 1% in SBUX instead of pouring your latte down the GE gutter, you'd be $11,217 richer.

The beauty of cherry picking data.

[Robot Monster]

Ten years ago if you invested $300K in a portfolio consisting of 99% Total Stock Market and 1% GE stock, you would be $14,229 poorer than if you just invested in Total Stock Market.

Source

That's the equivalent of pouring 3,898 Starbucks grande lattes (at $3.65 per cup) down the gutter, a veritable sea of wasted Starbucks.

You could also say 10 years ago if you had pick 1% of AAPL or AMZN what would of happened to your portfolio? Let's face it, this conversation could go a 1,000 different ways.

I worry that the success stories are already on people's minds when they bet on individual stocks, so, I'm just showing what a bad outcome might look like.

BTW, 3,898 Starbucks grande lattes = 487.25 liquid gallons. If there are 42 gallons in a bathtub, that amount will fill 11 bathtubs, with 25 gallons to spare, which you might line up on your back lawn, in big jugs, for use as expensive target practice. (Mind local and state ordinances when discharging firearms.)

Ten years ago if you invested $300K in a portfolio consisting of 99% Total Stock Market and 1% GE stock, you would be $14,229 poorer than if you just invested in Total Stock Market.

Source

That's the equivalent of pouring 3,898 Starbucks grande lattes (at $3.65 per cup) down the gutter, a veritable sea of wasted Starbucks.

On the other hand, if you had invested that 1% in SBUX instead of pouring your latte down the GE gutter, you'd be $11,217 richer.

The beauty of cherry picking data.

See above.

[cheese_breath]

Ten years ago if you invested $300K in a portfolio consisting of 99% Total Stock Market and 1% GE stock, you would be $14,229 poorer than if you just invested in Total Stock Market.

Source

That's the equivalent of pouring 3,898 Starbucks grande lattes (at $3.65 per cup) down the gutter, a veritable sea of wasted Starbucks.

On the other hand, if you had invested that 1% in SBUX instead of pouring your latte down the GE gutter, you'd be $11,217 richer.

The beauty of cherry picking data.

And the sewer rats would be able to sleep a lot better.

[csh]

I don't think it would necessarily be bad to indulge your wife here. Just be sure that you two are good natured about the whole thing. You should also come up with an exit strategy for any given stock purchase. Cutting your losses or walking away from the table with your winnings. I'll give you an example. For various reasons both DW and I were interested TSLA back in March during the crash. I had a rather bearish price target where I would be interested and set a limit order that never hit. Now that TSLA has hit all time highs I asked DW if she would be willing to sell had we bought back in March. I was happy to hear that she would want to sell and walk away with a healthy gain. Know where that money ear marked for that limit order went? VTI/VTSAX

The stocks you mentioned does give me the impression that some FOMO might part of what is going on, so proceed with caution. I can't tell you what will happen with those stocks in the future, but I fear there is a small speculative bubble going or it could be a defensive play for some due to the current cash flow at these companies during covid. You could look for others using different perspectives like the Dogs of the Dow mentioned earlier. But then again, based upon what you posted this might not be about the long play and more about short term speculation. I think there are some bargains outside of tech, but those would likely be long play, not exciting, and under perform the market over the duration.

Whatever you decide to do, good luck.

[dbr]

I think the OP says the wife doesn't know the mechanics, but that does not mean hubby needs to do the stock picking.

Why not ask her for some ideas and then sit down together with your account on line. Hopefully that would not be Pandora - Open Box.

[MN-Investor]

I own a small number of individual stocks mostly because I like the companies, they are mostly all local companies, and I just enjoy seeing how they're doing. They make up <5% of my portfolio so not a big deal. Individual stocks I own - 3M, Target, Hormel, Toro, Honeywell, General Mills, and Donaldson.

You should just buy the Mairs and Powers Growth Fund - they own MN domiciled companies and are more diversified than the list you have above.

My husband and I actually considered that a number of years ago, but decided that we would stick with either index funds or a small number of individual stocks. We've actually attended some stockholders' meetings of the companies we owned shares in. The Hormel stockholders' meetings have been fantastic!

Ham sandwiches?

The annual meeting fills the high school auditorium with overflow into the gymnasium. The local high school chamber orchestra plays music as people enter. The whole production is informative and entertaining and each stockholder gets a gift box of products and coupons as you leave.

[Artful Dodger]

It’s too bad some folks see taking a minor interest in stock picking (in your case, 1% of your portfolio), and extrapolate that into all kinds of doom and gloom. You’ve got some good responses, either specific picks or suggestions to narrow the choices. I would ignore all the others that are unnecessary judgements.

A few years ago, my wife and some of her friends formed an investment club. They had to do some research on specific stock picks and report back to their group. They then chose which stocks to buy in their own accounts. My wife either let made some lucky choices or she’s an investment genius. We’ve still got them, though 90% of our equity funds are in index investments.

[retire2022]

But she doesn't really quite know about the mechanics, so wants me to do it.

Smallibigs

Please read Benjamin Graham The intelligent Investor, he was Warren Buffet's mentor, 90 year old methodology value investing works

https://www.e-reading.club/bookreader.p ... vestor.pdf

Here is the Cliff note version:

https://www.investopedia.com/terms/b/bengraham.asp

Benjamin Graham
By Julia Kagan
Updated Nov 8, 2019
Who is Benjamin Graham

Benjamin Graham was an influential investor whose research in securities laid the groundwork for in-depth fundamental valuation used in stock analysis today by all market participants. His famous book, The Intelligent Investor, has gained recognition as the foundational work in value investing.
Breaking Down Benjamin Graham

Benjamin Graham was born in 1894 in London, UK. When he was still little, his family moved to America, where they lost their savings during the Bank Panic of 1907. Graham attended Columbia University on a scholarship and accepted a job offer after graduation on Wall Street with Newburger, Henderson and Loeb. By the age of 25, he was already earning about $500,000 annually. The Stock Market Crash of 1929 lost Graham almost all his investments and taught him some valuable lessons about the investing world. His observations after the crash inspired him to write a research book with David Dodd, called Security Analysis. Irving Kahn, one of the greatest American investors, also contributed to the research content of the book.

Security Analysis was first published in 1934 at the start of the Great Depression, while Graham was a lecturer at Columbia Business School. The book laid out the fundamental groundwork of value investing, which involves buying undervalued stocks with the potential to grow over time. At a time where the stock market was known to be a speculative vehicle, the notion of intrinsic value and margin of safety, which were first introduced in Security Analysis, paved the way for a fundamental analysis of stocks void of speculation.
Benjamin Graham and Value Investing

According to Graham and Dodd, value investing is deriving the intrinsic value of a common stock independent of its market price. By using a company’s factors such as its assets, earnings, and dividend payouts, the intrinsic value of a stock can be found and compared to its market value. If the intrinsic value is more than the current price, the investor should buy and hold until a mean reversion occurs. A mean reversion is the theory that over time, the market price and intrinsic price will converge towards each other until the stock price reflects its true value. By buying an undervalued stock, the investor is, in effect, paying less for it and should sell when the price is trading at its intrinsic worth. This effect of price convergence is only bound to happen in an efficient market.

Graham was a strong proponent of efficient markets. If markets were not efficient, then the point of value investing will be pointless as the fundamental principle of value investments lies in the ability of the markets to eventually correct to their intrinsic values. Common stocks are not going to remain inflated or bottomed-out forever despite the irrationality of investors in the market.

Benjamin Graham noted that due to the irrationality of investors, including other factors such as the inability to predict the future and the fluctuations of the stock market, buying undervalued or out-of-favor stocks is sure to provide a margin of safety, i.e. room for human error, for the investor. Also, investors can achieve a margin of safety by purchasing stocks in companies with high dividend yields and low debt-to-equity ratios, and diversifying their portfolios. In the event that a company goes bankrupt, the margin of safety would mitigate the losses that the investor would have. Graham normally bought stocks trading at two-thirds their net-net value as his margin of safety cushion.

The original Benjamin Graham Formula for finding the intrinsic value of a stock was:

V = EPS × (8.5 + 2g)where:V = intrinsic valueEPS = trailing 12-mth EPS of the company8.5 = P/E ratio of a zero-growth stockg = long-term growth rate of the company\begin{aligned}&V \ =\ EPS \ \times\ (8.5\ +\ 2g)\\&\textbf{where:}\\& V\ =\ \text{intrinsic value}\\&EPS\ =\ \text{trailing 12-mth } EPS\text{ of the company}\\&8.5\ =\ P/E\text{ ratio of a zero-growth stock}\\&g\ =\ \text{long-term growth rate of the company}\end{aligned}​V = EPS × (8.5 + 2g)where:V = intrinsic valueEPS = trailing 12-mth EPS of the company8.5 = P/E ratio of a zero-growth stockg = long-term growth rate of the company​

In 1974, the formula was revised to include both a risk-free rate of 4.4% which was the average yield of high grade corporate bonds in 1962 and the current yield on AAA corporate bonds represented by the letter Y:

V=EPS × (8.5 + 2g) × 4.4YV=\frac{EPS\ \times\ (8.5\ +\ 2g)\ \times\ 4.4}{Y}V=Y

EPS × (8.5 + 2g) × 4.4​
Benjamin Graham's The Intelligent Investor

In 1949, Graham wrote the acclaimed book The Intelligent Investor: The Definitive Book on Value Investing. The Intelligent Investor is widely considered the bible of value investing and features a character known as Mr. Market, Graham’s metaphor for the mechanics of market prices. Mr. Market is an investor’s imaginary business partner who daily tries to either sell his shares to the investor or buy the shares from the investor. Mr. Market is often irrational and shows up at the investor’s door with different prices on different days depending on how optimistic or pessimistic his mood is. Of course, the investor is not obligated to accept any buy or sell offers. Graham points out that instead of relying on daily market sentiments which are run by investor’s emotions of greed and fear, the investor should run his own analysis of a stock’s worth based on company’s reports of its operations and financial position. This analysis should strengthen the judgment of the investor when s/he’s made an offer by Mr. Market. According to Graham, the intelligent investor is one who sells to optimists and buys from pessimists. The investor should look out for opportunities to buy low and sell high due to price-value discrepancies that arise from economic depressions, market crashes, one-time events, temporary negative publicity, and human errors. If no such opportunity is present, the investor should ignore the market noise.

While echoing the fundamentals introduced in Security Analysis, The Intelligent Investor also provides key lessons to readers and investors by advising investors to not follow the herd or crowd, to hold a portfolio of 50% stocks and 50% bonds or cash, to be wary of day trading, to take advantage of market fluctuations, to not buy stocks simply because it is liked, to understand that market volatility is a given and can be used to an investor’s advantage, and to look out for creative accounting techniques that companies use to make their EPS value more attractive.

One notable disciple of Benjamin Graham is Warren Buffett, who was one of his students at Columbia University. After graduation, Buffett worked for Graham’s company, Graham-Newman Corporation, until Graham retired. Buffett, under the mentorship of Graham and value investing principles, went on to become one of the most successful investors of all time and as of 2017, the second wealthiest man in the world valued at almost $74 billion. Other notable investors who studied and worked under the tutelage of Graham include Irving Kahn, Christopher Browne, and Walter Schloss.

In addition to teaching at Columbia Business School, Graham also taught at UCLA Graduate School of Business and the New York Institute of Finance.

Although Benjamin Graham died in 1976, his work lives on and is still widely used in the twenty-first century by value investors and financial analysts running fundamentals on a company’s prospect for value and growth.

[raiderjkwong]

I would buy 1 share of AMZN and see where it goes in 10-20 years.

[RyeBourbon]

Do you guys ever do cruises?

With some cruise line stocks, you get some sort of perk if you hold 100 shares of the line's stock. They are al pretty cheap right now...

That's what my wife did. Put $3k into NCLH in March when it fell from the 50's to $20. Got in a little early as it subsequently went under $10 and is at $18 now.

I expect to see it in the 40's in a year or so, but it's just a little play money. We'll take the $100 OBC each time we cruise so it's like a little dividend.

[reln]

Now, you might be initially thinking, "this guy's wife is making him invest his money." Fortunately, this isn't the case. Our strategy has always been (for now) just 90% VTSAX, 10% VTBLX and call it a day.

However, my wife has itchy fingers and wants to buy single stocks. But she doesn't really quite know about the mechanics, so wants me to do it.

She has given me (or herself), a budget of US$3,000 and wants to dabble. I've turned to you guys because, I honestly don't really know what to buy (which I feel is a good thing!)

I was thinking throwing it all in BRK.B, because that technically is a single company. Or maybe an actively managed Vanguard growth fund? Or just put it all in VTI, because she honestly has no clue about the ticker names. But that's kind of boring.

So, I thought to ask you guys about it. If you had $3,000 play money, and this really was play money, what would you do? If it gains, we get money. If it drops, it'll be a lesson to her to stop having windfall fantasies. Disclaimer, this doesn't affect our retirement strategy at all.

If I had 3k given to me in the form of stock and I couldn't sell it for 1 year, I would choose Amazon.

[protagonist]

Your wife is the one with the itch, but you are the one picking the stock?

My thoughts exactly. Wants to buy stock, doesn't know where to start.

But if she is gambling with a small part of the portfolio and is interested, what better motivation to learn? If she does it on her own, whether she wins or loses is not that important, but an education is always a good thing.