COMMENTARY ON CHAPTER
Human felicity is produc’d not so much by great Pieces of good
Fortune that seldom happen, as by little Advantages that occur
every day.
—Benjamin FranklinTHE BEST DEFENSE IS A GOOD OFFENSE
After the stock-market bloodbath of the past few years, why would any
defensive investor put a dime into stocks?
First, remember Graham’s insistence that how defensive you should
be depends less on your tolerance for risk than on your willingness to
put time and energy into your portfolio. And if you go about it the right
way, investing in stocks is just as easy as parking your money in bonds
and cash. (As we’ll see in Chapter 9, you can buy a stock-market index
fund with no more effort than it takes to get dressed in the morning.)
Amidst the bear market that began in 2000, it’s understandable if
you feel burned—and if, in turn, that feeling makes you determined
never to buy another stock again. As an old Turkish proverb says,
“After you burn your mouth on hot milk, you blow on your yogurt.”
Because the crash of 2000–2002 was so terrible, many investors
now view stocks as scaldingly risky; but, paradoxically, the very act of
crashing has taken much of the risk out of the stock market. It was hot
milk before, but it is room-temperature yogurt now.
Viewed logically, the decision of whether to own stocks today has
nothing to do with how much money you might have lost by owning
them a few years ago. When stocks are priced reasonably enough to
give you future growth, then you should own them, regardless of the
losses they may have cost you in the recent past. That’s all the more
true when bond yields are low, reducing the future returns on income-
producing investments.
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