The Intelligent Investor: The Definitive Book On Value part 39. The purpose of this book is to supply, in a form suitable for laymen, guidance in the adoption and execution of an investment policy. Comparatively little will be said here about the technique of analyzing securities; attention will be paid chiefly to investment principles and investors’ attitudes. We shall, however, provide a number of condensed comparisons of specific securities - chiefly in pairs appearing side by side in the New York Stock Exchange list in order to bring home in concrete fashion the important elements involved in specific choices of common stocks | 366 The Intelligent Investor such preferences should do no harm beyond that it may add something worthwhile to the results. With the increasing impact of technological developments on long-term corporate results the investor cannot leave them out of his calculations. Here as elsewhere he must seek a mean between neglect and overemphasis. COMMENTARY ON CHAPTER 14 He that resteth upon gains certain shall hardly grow to great riches and he that puts all upon adventures doth oftentimes break and come to poverty it is good therefore to guard adventures with certainties that may uphold losses. -Sir Francis Bacon GETTING STARTE D How should you tackle the nitty-gritty work of stock selection Graham suggests that the defensive investor can most simply buy every stock in the DowJones Industrial Average. Today s defensive investor can do even better-by buying a total stock-market index fund that holds essentially every stock worth having. A low-cost index fund is the best tool ever created for low-maintenance stock investing-and any effort to improve on it takes more work and incurs more risk and higher costs than a truly defensive investor can justify. Researching and selecting your own stocks is not necessary for most people it is not even advisable. However some defensive investors do enjoy the diversion and intellectual challenge of picking individual stocks-and if you have survived a bear market and still enjoy stock picking then nothing that Graham or I could say will dissuade you. In that case instead of making a total stock market index fund your complete portfolio make it the foundation of your portfolio. Once you have that foundation in place you can experiment around the edges with your own stock choices. Keep 90 of your stock money in an index fund leaving 10 with which to try picking your own stocks. Only after you build that solid core should you explore. To learn why such broad diversification is so important please see the sidebar on the following page. 367 .
