Quote 3
The defensive (or passive) investor will place his chief emphasis on the avoidance of serious mistakes or losses. His second aim will be freedom from effort, annoyance, and the need for making frequent decisions.
Indeed, Graham sketched out an asset allocation strategy that is still a perfectly sensible starting point:
Quote 4
He [the passive investor] should divide his funds between high-grade bonds and high-grade common stocks. We have suggested as a fundamental guiding rule that the investor should never have less than 25% or more than 75% of his funds in common stocks, with a consistent inverse range of between 75% and 25% in bonds. There is an implication here that the standard division should be an equal one, or 50–50, between the two major investment mediums.
Of course, you couldn’t just buy a globally diversified ETF in Graham’s time. But his advice readily translates into the purchase of a large cap index tracker such as an MSCI World ETF and a high-quality government bond ETF. Beyond that, Graham was clearly an advocate of the buy and hold strategy:
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For he, read he, she, or any colour of the rainbow.
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